In his new book, Blunder, Wonder, Thunder, George Hartman President and CEO of Market Logics Inc. states, "If your clients do business with you rather than your practice, you have nothing to pass along to a successor."
How does an advisor determine if this is the case for him or her? "It takes doing an introspective exercise," Mr. Hartman explains. "Advisors can ask themselves, 'If I didn't show up for 30 days, what would happen to the business?'"
If the answer is, "The phone would stop ringing; I would cease to do business," then your clients are doing business with you and not your organization, he adds.
In this scenario, the challenge is brand-building, in particular, "shifting the business to bigger than me...from a brand of me, to a brand of we." This shift will require emphasizing the organization's processes and staff. "You must convey the message that the business would be well managed without me. Is it difficult to do this? Yes, but it is necessary," says Mr. Hartman.
Vince Conte, a Chartered Business Valuator, and Senior Manager, Financial Advisory with Deloitte, also underlines the importance of this transition. "You want to create lasting value that is attached to the business as opposed to you." He adds that the goal is to transform "your personal goodwill into commercial goodwill."
Successfully achieving this transition takes time, he adds, so planning ahead is necessary. "You can't do that in a few months. It takes a few years or longer."
During this period, Mr. Conte says the objective should be to remove clients' dependency on the key advisor who is selling. "You want to make sure that there are capable mid-level staff who can run the business "so they can become the trusted advisor of the client as opposed to you."
Mr. Conte also recommends emphasizing value-added programs "that associate the client with the brokerage entity as opposed to the individual owner-advisor." This might be done by using products such as competitive wrap programs, asset allocation strategies, relationships with fund managers, etc. The goal is to promote such offerings as products and services that the firm provides, instead of "you as an individual."
Cindy Jenner Cowan, Director, Training for Worldsource Financial Management, says that in any advice business, clients will often develop a dependency on their advisor, similar to what can happen with a doctor-patient relationship.
"I've spoken with many clients who absolutely adore their advisors. One of these clients' greatest fears is what happens if their advisor is not there."
This is why she calls it "almost a fiduciary responsibility" for the advisor to find the right match in their successor and take enough time to transition the new advisor into the business, allowing a certain comfort level to be achieved, she adds.