Special Feature

Passing the torch

This three-part series explores the succession planning process for financial advisors. Part one addresses the importance of planning ahead and the risks of procrastinating. Part two outlines different types of succession plans, and part three examines communication strategies. Gain more insight into the advantages of succession planning in a video featuring Julie Littlechild, president of Advisor Impact Inc.

Practice Management

Don’t shy away from conversations about succession; communicate with clients to get them on board

By Rudy Mezzetta |

A key factor in any advisor's business succession strategy is communication. Clients and team members need to feel that they are a part of a transition plan, lest they become disgruntled or demoralized and start looking for the exits.

Whether it's between the retiring advisor and his or her successor; the advisor and the rest of the team; or the advisor and his or her clients, experts say good communication is vital to protecting the long-term value of an advisor's business.

"The more we tell people what's going on, and as much in advance as we can, the more time stakeholders have to get used to the transition, and the more opportunity we have to demonstrate that it's the right thing to do," says George Hartman, CEO of Market Logics Inc. in Toronto.

Although the advisor is always the CEO of his or her business, and the person who ultimately decides on the timing and shape of a succession strategy, he or she needs to persuade clients and stakeholders to get on board.

The first level of communication should be between the advisor and the possible successor. Experts suggest that there be a clear understanding between the advisor and the successor about the timing and shape of the succession plan. Ideally, the plan should be written down, as well.

"Both parties have to be comfortable with the plan, and both parties have to agree on the transition period," says Joanne Ferguson, president of Advisory Pathways Inc. in Toronto.

Once a plan starts to come together, it's very important to communicate with team members so that they understand how and why the successor was chosen, and why the plan will be executed in a certain way.

Finally, it's important to manage communication with clients. Some clients may even approach the advisor first to inquire about what he or she has planned in terms of succession, especially if the advisor is starting to approach the traditional age for retirement.

"I wouldn't shy away from that conversation if it came up," says Julie Littlechild, president of Advisor Impact Inc. in Toronto.

If the successor is a junior associate, you should manage the transition in a gradual way. Slowly introduce the successor to clients, and then give him or her increasing responsibility and interaction with clients as time goes by.

"I think a lot of succession [planning] can happen very naturally over time. Eventually clients will start going to the other person just as much to you, and then [the news of the succession] is an easy sell," Littlechild says.

If the sale of the business is to an experienced advisor, the transition may need to be managed in a shorter period. In this scenario, you need to be proactive in explaining to clients why the successor is the right person to take over, and how the succession is going to happen.

"It's just about taking care of your clients in the long run, and doing it in a way that's going to be right for them," Littlechild says.

This is the final article in a three-part series on succession planning.