Building your practice: a good transition is an advisor's legacy

The final 11 steps to ensure a successful transition

Building your practice: a good transition is an advisor's legacy
Christine Timms

A good transition to your successor is an advisor’s final opportunity to do good things for their clients, their team and their firm. It is similar to a last will and testament. I have often said to clients “Be very careful with your will, it will be the last words you ever say to your family/heirs and it will be remembered forever”. The last thing you do for your clients is provide them with your successor and that successor will affect their financial lives for many years to come. It was my goal to provide clients with peace of mind long after I left. I am confident that I accomplished this with the help of my successors, my team and my firm.

The previous two articles in this series covered the first 7 steps of an 18-step succession planning process including steps leading up to and choosing the successor for the exiting advisor’s clients and practice. The remaining eleven steps are dedicated to the process of preparing the successor’s practice and the exiting advisor’s clients.

STEP 8: Plan a timeline

Both the referring and the successor advisor(s) will benefit from planning a timeline for the remaining transition steps together. The timeline should provide both the successor and the referring advisor with target dates for the completion of each step.

STEP 9: Compare service and product differences

This comparison will identify services, products and fees that the exiting advisor’s clients are accustomed to, as well as services, products and fees offered by the successor advisor that may be new and beneficial to the clients.

STEP 10: Determine the future of existing team members

Some of the exiting advisor’s team members may not be a good fit with the successor’s future team for reasons of their own or for the successor’s reasons. The successor and the exiting advisor need to work with each member of the exiting advisor’s team to determine who will be part of the successor’s team. I recommend open and frequent communication between each team member and both advisors throughout the planning process.

STEP 11: Plan the roles of the future team members

The successor needs to determine the future team structure, roles and specific duties for each future team member with input from both the exiting advisor and team members.

STEP 12: Plan the office space to fit the future team

Will more space be required to accommodate a bigger or combined team? Does the successor advisor need to change branches? Renovations to existing space or creating a new team location often takes much longer than anticipated. Planning ahead will reduce disruptions.

STEP 13: Modify successor’s website and marketing material

The successor advisor(s) website and marketing material will likely need to be modified to reflect new team members and/or services.

STEP 14: Create contract(s) between successor(s), exiting advisor and firm

The successor advisor and the exiting advisor should both feel like they are getting a good and fair deal (win-win). In my opinion, the contract between the successor and the exiting advisor is best when all parties (successor advisor, exiting advisor and firm) share the risk of the future practice. It will minimize the potential of an adversarial relationship between the successor and exiting advisor. A non-adversarial relationship will allow everyone to relax and focus on the real task at hand… retaining and pleasing the clients.

Issues to be Addressed by Client Transition Contracts

  1. Determining fair compensation to exiting advisor for referring clientele
  2. Decide between fixed payout or variable payout based on retention
  3. Treatment of referrals after retirement
  4. Guarantee of payments by firm to the exiting advisor and their heirs
  5. Retiree and successor payment structures: frequency, duration and amount
  6. Transitioning support required from exiting advisor
  7. Restrictions on exiting advisor (non-compete)
  8. Successor restrictions
  9. Include list of all referred households and accounts

STEP 15: Prepare scripts for client conversations

The scripts should introduce the new advisor and describe any expected changes to the approach to investing and service model. The script will help the exiting advisor ensure major points are covered even when the reminiscing starts.

STEP 16: Notify the clients of pending transition to new advisor

The whole point of a succession plan is to prevent clients from turning to a new advisor that the exiting advisor has not chosen for them. The process of informing clients should answer all the obvious questions they are likely to have when they receive the news.

It is very important that every client hear the news directly from the exiting advisor via a personal phone/virtual call or in-person meeting allowing the exiting advisor to respond immediately to client’s reactions, address any misunderstandings and put the client’s mind at ease.

STEP 17: Plan a period of overlapping service

Clients should be comfortable with the idea of the exiting advisor’s absence before they "disappear". It is best to develop a relationship between the successor and the clients through a period of joint or overlapping service. This can be accomplished through joint meetings and through the successor advisor providing various services directly to the client. Overlapping service before retirement is easiest if a team member of the exiting advisor is the successor(s). The overlap can also occur after retirement where the successor retains the retiree on salary for a specified minimum period. A one-year overlap would provide one full-service cycle (review meetings, contributions, tax season, etc.) allowing the client to experience the continuation of the services through the successor advisor. If the successor will be offering a new investment or service approach to the referred clients, a longer overlap period may be needed so that the clients can see the referring advisor endorse the change and experience what the successor brings to the table.

STEP 18: Notify your clients of your final exit date

When the exiting advisor has finalized their retirement date, send a formal retirement letter/e-mail with enough time for clients to say their final goodbyes (likely a month or two).

The process of choosing a successor and preparing to transition clients can be very daunting and unfortunately often results in advisors delaying their exit. To help advisors with the process provides downloadable templates including: steps of transition timeline checklist, successor evaluation worksheet, team member activity lists, business model articulation checklists, sample letters, and more.

The next Building Your Practice series of articles will relate to hiring, training, and motivating an advisor’s team.

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). provides handbook descriptions and testimonials, written and audio versions of the introductions, and templates to facilitate the implementation of many of the ideas discussed.