When preparing your succession plan, your ability to communicate that plan clearly to your clients will determine whether those clients remain with your practice through the transition, according to April-Lynn Levitt, coach with the Personal Coach in Oakville, Ont. The stronger your communication plan, the more likely your clients will stay with your chosen successor.
You can make your transition as seamless as possible by avoiding these three common succession-planning mistakes:
1. Failing to discuss your plans with your clients
If you are approaching retirement age, warn your clients about a potential exit strategy — even if you haven’t yet picked an advisor to fill your shoes. Levitt advises communicating your goals two, three or even up to five years in advance.
Your clients may not bring up the topic, but they know that aging advisors won’t stick around forever. If you don’t broach the subject, they may wonder whether you have a plan, and start to worry about their financial future.
“I have seen clients leave their advisor and go to someone younger,” Levitt says, “because they think [the advisor will retire soon], and the advisor hadn’t really talked about it with the client.”
If you have a successor in mind, give your clients time to get used to the idea of a transition, Levitt says. So, if your candidate is an associate advisor, introduce your clients to that person and invite him or her to sit in on client meetings. While that is not always possible, it is the best-case scenario.
2. Not having a formal plan
An informal transition strategy created and frequently amended on the fly may leave your clients in the dark. A good succession plan should include a client-communication plan. Levitt advocates a two-step approach: inform clients in person and then send a follow-up letter.
Additionally, a note in your newsletter can be an effective way to inform clients about your plans, even if you’re not retiring for a few more years.
“You risk missing people,” Levitt says, “if you just assume that everyone knows that [the transition] is happening.”
3. Failing to brief the successor advisor adequately
Sometimes an advisor will buy a practice or take over for a retiring advisor and receive files with only basic client information, Levitt says. The new advisor is left without complete notes on clients’ immediate and extended families, hobbies and top financial concerns.
Even if the departing advisor can’t spend a significant amount of time training the new advisor, the two advisors should at least get together to discuss the clients.
“It’s a much easier transition if clients don’t have to retell their story again to someone else,” Levitt says. Otherwise, they might as well be starting with an altogether new advisor.