Five Guiding Principles For Mature RIAs To Control The Transfer Of Cherished Clients

Originally published on Forbes.com.

I’ve noticed a trend over the past few years. Some mature financial advisors feel stuck. I’ve especially noticed this among registered investment advisors (RIAs), where people have the freedom to build their practice. Some RIAs have been careful to build a book of business composed of people they really care about.

But at some point, the advisor realizes they have a problem. They’ve built client relationships intentionally over time. They’ve satisfied a wide range of client needs, applying true wealth management practices that go beyond mere investment advice. In some instances, they’ve actually become the advisor to their client’s children, too. It’s the intimacy of their client knowledge, the close relationships, that have allowed them to serve their clients so well.

In fact, these advisors have come to see their clients as friends. They’ve witnessed the births of children or even grandchildren. They know their clients’ hopes and dreams for the future. In many ways, their clients’ dreams have become their dreams, too. And that introduces a problem. The advisor knows they will not be in their clients’ lives to see those dreams come true because the advisor’s retirement is around the corner. But they’re so invested in what happens to those clients that they don’t want to see the level of service go down, potentially endangering those dreams.

As this advisor looks around at their options for transferring their clients, they probably don’t like a lot of what they see. It might feel like there are no good choices. There are dozens of people lining up to take over the client relationships. But how can the advisor know they’re leaving their valued clients in great hands? How can they be confident that a new advisor will care about their clients like they did? How can they make this one last, and maybe most important, move for their client: selecting who will manage the relationship after they retire?

Five Guiding Principles

If this sounds like you or someone you know, I’d like to share some ideas that can really help. Over the past ten years, I’ve worked closely with dozens of advisors who’ve made this transition. Here are five guiding principles that have helped them go out on top — leaving their clients in the best shape possible and giving them a great payout for their years of excellent service.

1. Begin With The End In Mind

Most advisors facing this dilemma consider two options: transfer clients internally or to an outside entity. It’s often hard to know which option might be best. To help other advisors make this call, I’ve come up with a solution that seems to work pretty well.

I ask the advisor to describe how they’ll feel once their ideal client-transfer has occurred. I do this because I want them to build a vision for what their ideal future could look like. I use these questions:

• When you look back over your career and achievements (which most people tend to do in retirement), what must have happened for you to feel like you went out on top? What must you have done to produce the best possible outcome for your clients?
• If you were to meet a former client while you’re out at a nice dinner, what must have happened for you to feel good about walking over and shaking their hand versus avoiding them? Will you cringe when you see them or greet them with joy, like an old friend?

2. This Is More Process Than Event

Most advisors who’ve built the kind of practice I described above did so over 20 or more years. It took a lot of time and focus. I encourage advisors to think the same way about client transfer. It will require time and focus, too. This is not a one-time event, and it probably won’t happen quickly. If time allows, I encourage advisors to think of this as a five-year process, if not longer.

3. You Need A Comprehensive Plan

This type of advisor already knows the benefits of the long-term plans they’ve built for clients. But they probably don’t know how to build a plan for this phase of their career. Why would they? They’ve never faced it before. In my experience, you probably need a plan for at least these three phases:

• Client transfer: Have a plan to do this in the most honorable way possible.
• Payout on book: Create a fair and equitable financial strategy for all involved.
• Retirement: Know what you’ll do with your time when you’re no longer working.

4. You Should Have A Voice In Selecting A New Relationship Manager

For some advisors, this is a top concern. I’ve come to believe that if you don’t get a chance to vet the new relationship manager, you’re probably never going to have real peace of mind. So my advice here is this: If you don’t get to vet the new relationship manager, that’s not really an option worth considering.

?5. You Should Be Patiently Impatient

Thomas Edison found a lot of ways that didn’t work as he sought to create a commercially viable lightbulb. As each new attempt failed, he simply started over and used his lessons learned to make the next attempt even better. Once it was clear that a certain design wouldn’t work, he abandoned it. But he never abandoned the end goal.

I think that’s sound advice for anyone facing this situation as an advisor. You may have to explore several options before you find the ideal situation for your clients. So my advice is simple: Don’t settle. Don’t give up because better options really are out there if you’re willing to find them.