Advisor Succession Planning - Nicola Wealth

Advisor Succession Planning


By Joel Kranc

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MEDA-2013-02-19- Transition clients to a new advisor (header)

When it comes to planning their own retirement, it’s common knowledge that advisors are no good at planning their own exit. Many advisors wade into pre-retirement unprepared for their own transition and that can have serious consequences.

But says David Chalmers, a financial advisor with Nicola Wealth Management, has started his transition to retirement, however it was not without challenges and work. Particularly time-consuming was finding the right person and then completing the transition of his clients.

“What was key for me was to find someone with the people and technical skills, and the beliefs and value systems, that were close to mine to do a good job of management of those clients,” he says admitting it was not an easy task.

He found such a person at a previous firm he had worked at and, during sit down meetings together they began identifying which of Chalmers clients would be best to hand over.

They agreed that younger clients would be a good fit for the new other as Chalmers could not ensure he would see those younger people through to retirement.

Besides practical considerations of age, there’s also client attitude and perception to reflect on. “You also have to know something about the personality of the client and how it is positioned,” says Chalmers. While some might like the idea, others might feel they are being passed off to a “junior” person and will receive lower service. Knowing your clients will be key to identifying which ones will need to stay with you and which ones can be passed on to the new advisor.

Even though the process of transitioning clients to a new advisor is a time-consuming one, it’s not something advisors should put off.

“If you wake up one day at age 70 and have not done [succession planning], don’t be surprised if you lose your 30 and 40-year old clients,” says Chalmers. The biggest risk to avoiding transition planning is that advisors will lose clients, who recognize the need to find an advisor who can see them through to retirement. If more clients leave, the advisor might end up working harder than they had anticipated in their last years of work. That’s not the way anyone wants to prepare for retirement.

Chalmers transition tips:

  • Identify potential successors that impress you
  • Ask colleagues or others if they know people looking to buy a book of business
  • Chalmers took the step of using an industrial psychologist to assess his candidate, but the easier version is to ensure the person being considered is a good fit to your own personality
  • Know which clients will be accepting of the transition and which might still have to be kept on for a time
  • Go through a proper valuation of the business. In his case he compared hiring someone to manage the business versus the owner’s premium, which is the value of the business after paying someone to manage it.