Client Communications

Once you have mapped out your exit plan, how and when you inform your clients is critical

By Beatrice Paez |

Financial advisors are well-versed in laying the groundwork for their clients' retirement plans. But when it comes to planning their own exit from the business, many advisors are given to procrastination. Some fear that raising that topic with their clients will result in those clients defecting to other advisors.

However, as you plan your eventual exit, the best way to assure clients you have their best interests in mind is to have an open discussion about the transition.

"You have to be proactive in addressing the issue with your clients," says Evan Thompson, business coach and founder of Evan Thompson and Associates in Toronto. "Clients will appreciate the fact that the topic is broached in advance."

Thompson recommends notifying your clients of your plans one year before your projected exit date. Ideally, he adds, your succession process should be executed gradually, minimizing the level of uncertainty that comes with any change of responsibilities.

Evans offers the following tips for handling the succession-planning conversation with your clients:

> Offer firm facts
Wait until the deal has been finalized before discussing the details of your succession. Clients should be informed of how the transfer will unfold before you introduce them to your successor.

"You first need to ensure that the client is confident in the abilities of the new advisor," Thompson says.

One of the biggest concerns clients have is the impact a succession will have on their fees. If clients raise the issue, Thompson says, you must be upfront about any changes in fees and work to secure a fee structure that your clients will see as favourable.

> Avoid disclosing sensitive issues
If you're still negotiating the sale of your practice, don't discuss the negotiations with your clients, Thompson says. You shouldn't trouble clients with your anxieties about striking the right deal or scouting for the perfect candidate.

Throughout the succession process, clients need to feel that you are focused on managing their business, Thompson says.

> Don't send mixed messages
A discussion about a client's retirement can drift toward the topic of your plans for your practice when you retire. And, if you haven't given your exit much thought, an ambiguous response can leave clients feeling anxious, uncertain and inclined to seek a new advisor.

"Never say, ‘I'm thinking of moving on, but I'm just not sure'," Thompson says. Make sure you have a plan before you talk about it.

> Be mindful of timing
Three months is typically enough time to ease clients into the actual transition, Thompson says. During that "probationary" period, clients have a chance to build a rapport with their new advisor while still having the ear of their familiar, outgoing advisor.

If you stretch that time for much longer than three months, he adds, the process becomes too drawn out, making it difficult for the new advisor to instill trust and confidence.

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