Create a stronger succession plan

For Chris Raper and his team, there’s no such thing as a one-on-one client meeting. And he wouldn’t have it any other way.

Instead, his team at Chris Raper & Associates has adopted a buddy system, where one person manages a client’s portfolio while the other handles the relationship—but both are always present at client meetings. Raper, senior vice-president and portfolio manager at Raymond James in Victoria, B.C., uses the system with his partner, portfolio manager Ryan Cramp, and four other licensed team members.

“I started this policy many years ago,” Raper says. “I first saw it in action at an accounting firm where I used to attend client meetings. At those meetings, there was the senior manager, the account manager, the client and myself, and I came out thinking [the strategy] demonstrated strength within the organization.”

The approach was effective, he says, because the clients had multiple points of contact and support. And, they had more than one person to look after them if an advisor retired or had to take extended time off.

As a result, “we rarely get asked about our succession plans,” says Raper. “When the senior advisor of a [two-person] team moves on, there’s little discussion as to who will look after the clients because the younger advisor will remain, and the process we’ll follow is self-evident.”

Raper, 57, hasn’t decided precisely when to retire, but he’s taking on fewer clients as Cramp, and fellow advisor Erika Kuzio, take the lead more often. While Cramp is his intended successor, Raper is also training a second replacement, senior analyst Alex Vozian, for the day he retires.

“There is a natural evolution and the client always knows who’s next in line,” Raper says. “From day one with a client, I say very clearly my plan is this: ‘If I get run over by a bus, you’ll be well looked after. We’ve created redundancies on the investment side and on the relationship side because it takes a [larger] team to look after people today.’”

To some, a big team may seem unnecessary, but the additional personnel make it easier to keep up with client needs and compliance requirements. “The one- and two-person shops in this business are dinosaurs,” he says.

Raper isn’t the only advisor emphasizing clear client communication about succession. Justin Bender, portfolio manager at PWL Capital in Toronto, tells clients up front about his plan.

“You don’t want clients to be surprised,” says Bender, who works with Shannon Bender, an investment advisor (and his wife), as well as three other licensed team members. Bender, 35, doesn’t know when he’ll retire, but says “clients like the idea that there’s a team behind [me]. They’d be uncomfortable if it was one person, or one person and an assistant looking after them.”

Advisors unprepared

According to a 2015 U.S. study by Fidelity, 37% of owners of advisor firms were planning to exit the business within the next ten years, up from 30% in 2014.

Only 40% of all firms surveyed had succession plans ready, Fidelity found, which polled 441 firms between April and June 2015. While most (59%) preferred internal succession, only 27% had chosen next-generation owners.

Advisors need to be prepared, and can create checkpoints to know when it’s time to bring in a partner and explain your future plans. For example, when you can afford the salary and expenses of a partner but aren’t yet struggling to serve clients, start thinking about next steps. Also, if you’re prone to certain family illnesses, build your succession plan early.

Chris Raper, senior vice-president and portfolio manager at Raymond James in Victoria, B.C., says: “Clients are smart enough to know when you’re not growing, and [that could push them to] find someone else.” His team has brought on many younger advisors and clients and, even though he’s not taking the lead nowadays, he says, “This is what I want for my legacy: a business that serves clients well and grows.”

Scott Ward, financial advisor with Edward Jones in Oakville, Ont., also plans to bring up his transition process long before clients ask. “I’d hate for them to think they need to start shopping for a new advisor when I turn 60, for example, when I don’t actually want to retire until much later.”

Being prepared

Early in his career, Bender learned first-hand to prepare for the worst. Two of his predecessors at PWL Capital were diagnosed with cancer and had to retire sooner than anticipated.

In both instances, the transitions were smooth, Bender says, since he’d already started building relationships with the clients. Clients were told about the advisors’ illnesses as soon as possible. They were also given details about the likelihood of a succession process, and about a possible switch to Bender and his team, over the next few years.

At that time, Bender was building a solid book with his wife and one of his other team members, associate portfolio manager Dan Bortolotti. When the final switch occurred in 2015, the senior advisor who had fallen ill had mostly stopped growing her book—which was worth about $50 million at the time—preferring to leave that to Bender and his team while she focused on her health.

Bender says he and his team had grown a separate book worth $150 million at the time of the transition, “so it wasn’t a huge task to move the senior advisor’s clients.” It helped that the incoming clients were already comfortable with his processes, he adds.

Regardless of your health status, it’s a good idea to decelerate the growth of your direct client base as you near retirement, says Raper. You’ll know it’s time to pull back when a client wants a meeting and you’re consistently unavailable.

His firm jumps at the chance to start transitioning clients to younger teams. “That allows us to demonstrate that it’s not vital that I’m in every meeting, even though I’m still involved,” he says. “That allows for an easy transition over a longer period, but you should always ask whether there’s anything those transitioning clients specifically want to ask their original advisor. In a team-based environment, the answer is almost always no.”

The Benders, though younger, already know how they’ll transition their book, and tell clients their plan if asked. And, “when people sign on, they ask, ‘Who’s my main advisor and who do I talk to?’ And we’ll say, ‘I’ll be the main contact, but you can speak to anyone. They all know your file and situation, and if I’m not around, you can work with any of them.’ ”

They also have safeguards in the event someone has to retire early. Bender says they tell clients that “if something were to happen to [me or Shannon], like an accident or a health issue, we would always have Dan to take over, and vice versa.” And, they hired an additional advisor at at the end of 2016, who, over time, could also take over the business.

Further, the team has offices in Ottawa and Waterloo that could manage the practice in an emergency. On top of that, the team members have life insurance on one another. “We want to make sure that the [remaining] team members would be able to hire additional [support] if they had to,” Bender says.

The team reviews their succession plans every few years.

A set plan

For his part, Ward, 43, will follow his firm’s retirement transition process when the time comes. Ward, who’s 15 years into his career, explains: “My firm has a two-year retirement process and a whole transition team who will help you deliver consistent service and a seamless transition. The transition would need to be smooth for clients and, as the advisor, I would need to make sure I’ll still be compensated for managing that process.”

Ward says his firm will choose his replacement with his input. Although the transition period is two years, advisors are asked to prepare and share their retirement plans as early as 10 years prior. That allows advisors to better prepare clients and create additional contingency plans.

Having a succession process that spans years, he says, gives clients time to adjust to working with someone new. “The new advisor coming in is encouraged to focus on growing the practice, and on getting to know the clients and their goals. I would still be there to help and to ensure my philosophy and processes are seamlessly brought over.”

what to say to clients

When you’re sharing your retirement plans: “I want you to know what’s going to happen when I choose to retire. Right now, I love my job and I have no plans to retire, but I know I’m getting to a certain age and people are wondering. Please know that our team is still going to be here, no matter what. Further, I’ll have a hand in choosing who replaces me to ensure consistent service.”

–Scott Ward, Edward Jones, Oakville, Ont.

When someone’s seriously ill: “I wanted you to know that I [OR A TEAM MEMBER] have/has been diagnosed with [INSERT ILLNESS] and I am/they are undergoing treatments. I want to be open and honest about this, so here’s my/their schedule so you know when I’m/they’re available during this time.”

–Justin Bender, PWL Capital, Toronto

When someone’s retiring, you can say: “I wanted to let you know that I’ll be retiring and [that I’m available] to discuss my succession plan. You will be in good hands—[GIVE NAME OF YOUR SUCCESSOR] and I will be working together during this transition. But, going forward, [NAME OF SUCCESSOR] will be your main contact.”

If you’ve chosen a retirement date and want to announce it, schedule a joint meeting with your clients and successor, who should already be familiar with your clients.

–Justin Bender

When someone takes a long vacation: “I’m going to be away for [INSERT TIME PERIOD]. If you’d like to speak to me about anything prior to that, please let me know. If you need to contact me while I’m away, I will be available remotely,”

–Justin Bender, who suggests sending this message a month before any multi-week vacations.

When you’re bringing in a new partner: “My mentee became my partner when I couldn’t imagine the business without him. I like and respect him, he’s a team player, he thinks like an entrepreneur and he has skills I don’t.”

–Chris Raper

“The business has significantly grown over the last [INSERT NUMBER] years, so it’s time to bring in someone new. This way, we’ll be able to meet your needs more effectively. Even better, my new junior partner has skills and expertise that provide extra value.”