Taking a corporate approach to your financial planning practice by ensuring clients are at least aware of the other professionals inside your business is a crucial part of succession planning, according to a Business Health study.
Some 63 per cent of clients surveyed stated they would not be comfortable dealing with anyone else from the practice other than their current adviser, according to the Future Ready VI report released yesterday.
This drew results from 328 firms who worked with the consultancy practice between December 2012 and December 2014.
“But if the succession is planned and staggered, and the client is gradually introduced to someone else and it’s done over a period of years, then we’re not saying that 63 per cent of all clients will walk if the adviser goes,” says Rod Bertino, partner at Business Health.
He believes a good succession plan is one which deals with transitioning client relationships from the old principal to the new principal. When done at its best, he sees this is an ongoing, long-term process.
“A lot of advisers are not only not surprised by it, they’re quite proud of it, saying ‘it shows the depth of relationship I have with my client.’
“And that’s great, but it’s a double-edged sword,” Bertino says. For instance, for a younger planner it can be a very positive sign, “but if you’re 67…you’d better gradually wean those clients off.”
For financial planning practices, the danger lies in those unforeseen instances where a principal disappears unexpectedly, either through accident, illness or other misadventure.
“The guys who get tagged are the guys who get farmed out for health reasons, those that don’t get the chance to hold the client’s hand and do the handover, and if you haven’t developed a relationship so that they understand the corporate and individual relationships, they’re in trouble,” says Cameron O’Sullivan, general manager of product at Rubik Wealth, which sponsored the study.
O’Sullivan draws on his own experience as a financial planning practice principal, having been part of the Financial Wisdom and Charter dealer groups in prior years.
“Over 18 months, we moved 95 per cent of the clients successfully. I have no doubt if you’d have said to them ‘these guys are all out of here, do you think you’ll stay with the new guys coming in?’, two-thirds of them would’ve said no. But because we were able to do the transition and hand it over, it was fine,” he says.
According to Bertino, this highlights the extreme importance of client reviews. “If the clients are coming to your premises for the review, you have a chance to introduce people, to showcase , you can bring people in and out so that, God forbid if some day [the principal] isn’t there, at least I know the other people, I’ve met them.”
Bertino’s colleague and Business Health partner Terry Bell says some have embraced this process even further: “we know practices that have made their own succession plan part of their marketing strategy”.
