How to pass the baton without dropping it.
The steady growth of your firm has brought you the experience of being the primary manager of too many client relationships and it is now time to hand off some of your clients to an underling-not just to unburden yourself and free up time for business strategizing and premium clients, but to develop your staff by giving them more responsibility. Easier said than done.
Says Michael Koenig, managing partner of FirsTrust LLC in Daytona Beach, Fla., "We've found that introducing a 'replacement' advisor is a sensitive process that must be slowly infused into the client relationship. Our past success with it can be largely attributed to our meeting face to face quarterly with every client, giving us repeated opportunities to phase in the new advisor."
Why the sensitivity? Because ours is a relationship business. Your first clients formed an allegiance to you, the sole practitioner, or "original CFP," within your firm. Then you hired other planners, and now you ask clients to trade that allegiance for a new relationship. For most clients, this is about as comfortable as wife swapping.
But it goes beyond mere discomfort for some. Inexplicably, these clients bonded with you from the moment of their initial call to the firm. They were referred by a friend or someone who knew you well enough to have instilled an almost premature feeling of deep trust in you. This prospect was just waiting to speak to you for the first time so he could confirm that trust. No wonder he is going to go to another advisor within your firm kicking and screaming; it was love at first sight when he met you.
And that is why you must carefully craft your strategy for reassigning clients. If you fail to take seriously this transition, you may alienate and lose some of the best ones. An effective strategy, says Koenig, "is to introduce 'additional' advisors, not 'replacements.' The first planner can strategically introduce other planners into the client relationship [before a transfer takes place], thus adding value to the overall relationship instead of deteriorating it."
Yes, this is a version of today's much-heralded advice: Build a team, institutionalize your firm, make the clients and the firm less dependent upon you, the owner. And no doubt that's good advice for the larger firm. It's just that one has to get from here to there first, and it is in the process of expansion that the growing pain of client transfers must be dealt with.
Some advisors "sneak up" on the client with such a gradual change the client hardly sees it coming. William "Ike" Eichenberger of Harbour Pointe Financial Advisors LLC in Mukilteo, Wash., says "I decided to slowly transfer some of my clients to my CFP-certificant assistant to avoid client objections and provide him additional training. I meet with clients annually, so this year my assistant attended these meetings as an observer offering occasional comments. Next year both of us will meet with these clients and my assistant will run the meeting. The following year my assistant will be on his own, although I'll be available if questions arise."
Is there a way to speed up Eichenberger's time schedule? Stefan Prvanov of Blankinship & Foster in Del Mar, Calif., thinks so. "We let the assistant follow up with any action items or questions ... any opportunity to contact the client. We want the client to know that the planner is thinking about him and his situation. I've learned that clients will go directly to the person who can answer their questions or provide them with guidance." Prvanov says some clients will not accept reassignment, and the chemistry may not work between the client and the replacement. But, he adds,. "If you are able to reassign 90% of the group you want to reassign, you did great. The other 10% can be transitioned later and over a longer period of time."
Another variation on Eichenberger's approach is to include the associate planner in client meetings from the very beginning. Bert Whitehead, owner of Cambridge Connection Inc. and founder of the Cambridge Advisor network of fee-only planners, both based in Franklin, Mich., involves his associates in meetings and not only expects to transition his clients to them, but to have his associates leave with his clients-for a fee, of course.
Initially, the associate joins the meeting to familiarize him or herself with the client, begin the bonding process and handle follow-up tasks for Whitehead. Which is all by design. "I raise clients' fees steeply every three years," says Whitehead. "Those who object to the increase can elect to keep their lower fee by transferring to the advisor who has been teaming with me. Clients with whom I don't work well are faced with the highest fee increases to encourage them to switch."
Since each associate is on contract with a buy-out option after five years, they wind up paying Whitehead for his "B-list" clients-the ones who are small and/or difficult. Says Whitehead of his combined reassignment/transition strategy, "I've sold 16 startup practices to associates over the past 20 years for over $1 million in aggregate. I sell off my practice as I go along, and the people I hire give me a check on their way out the door." And it is all done on a friendly basis.