Building your practice: A win-win approach to transitioning clients between advisors

The benefits of the “win-win” approach are extremely evident during the transitioning of clients between the retiring advisor and the successor advisor. There should be a strong level of trust between all stakeholders in the transition. There are five sets of stakeholders:

• The clients (by far and away the most important of all stakeholders)
• The successor advisor(s)
• The remaining team members of the retiring advisor
• The advisor’s firm
• The retiring advisor and their family

I strongly believe that in order to maximize the benefits for both advisors, all stakeholders including both advisors should be winners and need to feel like winners upon completion of the retirement transition process. It might seem overly ambitious and altruistic to try to please all these stakeholders; however, ultimately, both advisors will benefit greatly by doing precisely that.

The size of the “pie” (the retiree’s compensation for the referral and the future revenue of the practice earned by the successor) will be greater and everyone will have peace of mind. The satisfaction of each of the stakeholders is generally very dependent on the satisfaction of the other stakeholders. If the client chooses to leave, everyone loses. If the successor advisor fails to please the clients, at the very least the client will not give additional business or referrals to the successor and once again everyone loses. If team members become less effective or choose to leave, client service and advisor efficiency will be adversely affected and once again, everyone loses.

Transition stakeholders' needs

I have listed below what I believe each of the stakeholders need to be winners and feel like winners in the transition process. By recognizing and appreciating these needs and striving to fulfill as many as possible, the retiring advisor will maximize their referral compensation and provide more peace of mind to all stakeholders. All practices and clienteles are unique, so the ability to meet these needs will vary. An advisor’s efforts to build their business and the planning for transition should position them and their successor to meet as many of these needs as possible.

Client's needs

• feel valued as the unique individuals they are, by both the retiring advisor and the successor advisor
• believe the successor advisor understands and cares about them
• believe the successor advisor is well qualified to be their advisor (combination of education and experience)
• understand and feel comfortable with the future approach to investing and servicing of their accounts
• feel comfortable with the team supporting the successor advisor
• believe that the successor advisor will be there for them for many years into the future

The successor advisors' needs

• be confident that they will be able to keep and please most of the retiring advisor’s clients
• be able to live up to clients’ expectations regarding level of service (amount, method and quality of contact including review meetings, financial plans, etc.)
• have complete confidence in the future approach to investing (maintaining the approach of retiring advisor or know that the clients will be comfortable with the successor’s different approach)
• know that the firm supports the transition and will offer ongoing support to the practice
• believe they are paying a fair price for the referrals
• know they can maintain their own lifestyle while they are paying for the referrals
• be prepared to assume the leadership role of the resulting team that will serve the referred clients

Remaining team member's needs

• believe they still have good career opportunities (likely within the successor’s team)
• understand and are comfortable with their roles/responsibilities during transition and after succession
• understand their compensation structure (salary and bonus) during transition and after succession
• know and are comfortable with their title after succession
• feel valued by the successor advisor (role, compensation, and title as well as personal attention will help)

Advisors' firm needs

• believe that the successor advisor is qualified (education, licences, and experience)
• have confidence in the successor’s ability to keep the clients
• be confident that the successor advisor will stay with the firm
• believe that the successor advisor is not a compliance risk

Retiring advisor's needs

• feel they can trust the successor advisor(s) to take good care of the clients (communication, investment advice, financial planning, overall service)
• feel they can trust the successor advisor(s) to value each team member appropriately and work well with the remaining team members
• believe they are receiving fair value for the referral of their clientele
• know that the firm supports the transition and will offer ongoing support to the successor advisor(s)

Satisfying the needs of all five stakeholders

Satisfying the needs of all stakeholders will increase the compensation value of the referral of the clientele and future revenue of the practice. It should also give everyone peace of mind. It should be clear from the lists of needs above that the most important decision is choosing the successor advisor. However, the timing of the retiree’s exit from the practice and the execution of a well-thought-out plan is also extremely important.

The next article in this series will outline various steps involved in the planning and process of transitioning a large group of clients between advisors.

Christine Timms is the author of three Handbooks for the Professional Financial Advisor including “Transitioning Clients and the Retirement Exit Decision” (available in paperback, ebook and audiobook). www.christinetimms.com provides descriptions and testimonials, as well as written and audio versions of the introductions of each book. You can reach Christine Timms on LinkedIn.