Tel 519-576-2262

About TPC Services How We Help Client Stories Coaching Centre Connect

Customized One-on-One Business Coaching for Financial Advisors

The Rising Importance of Transition Planning

We remain mired in the Covid-19 pandemic.

 

Amidst one of the worst public health crises and economic downturns in recent memory, financial advisor's have continued to help ensure the financial well-being of their clients. As the crisis continues, however, a growing number of advisor's are starting to turn attention to their own situation and the longer-term impact of Covid-19 on their business. They are beginning to ask the following questions:

 

  • What is my plan if I am no longer able to service my clients?
  • How might this crisis affect my own retirement?
  • I was planning to sell my business in the next 3-5 years. Does that timing still make sense?
  • How has this crisis affected the value of my business? What can I do to increase its value?
  • Do I have the motivation and desire to continue working as an advisor post Covid-19?

 

One of the most significant strategic challenges facing our industry prior to Covid-19 was the lack of advisor preparedness concerning Succession, Continuity and Exit Planning. We all know the stats. Only a small percentage (approx. 10%) of advisor's have a written plan for their succession, and the vast majority of advisor's were not even ‘thinking about’ the eventual transition of their business. In the era of Covid-19, however, this appears to be changing. A growing number of financial advisor's are realizing the importance of having a robust and well-documented Succession or Transition Plan in place.

 

This is a positive development. After all, the reality is that every advisor will one day transition out of their business and eventually exit the industry. The only question being on what terms and conditions. It seems obvious that not having a plan in place for an event that is certain to take place makes no sense whatsoever. A robust and well-documented plan is in the best interest of not only advisor's but also their clients, family members and staff.

 

What can we do to help financial advisor's take effective action and ensure their readiness?

 

In a series of articles over the next several months, we intend to explore the subject of Succession, Continuity and Exit Planning and the related trends and challenges facing advisor's in 2020 and beyond. Our objective is to offer insights and practical tips and suggestions on concepts and strategies, including case studies from The Personal Coach, to help advisor's take action and effectively shape the future of their firms.

 

Getting Started - Take a Different Approach to Transition Planning

 

One of the most frequently asked questions I get from advisor's who are keen to develop a Transition Plan is - ‘Where do I start?’

 

What I often suggest is that they start by adopting a different way of thinking about the concept of Transition Planning. And that starts with a clear understanding of the terms Succession Planning, Continuity Planning and Exit Planning and how these concepts ought to work together to create a robust Transition Plan. By doing so, advisor's will create for themselves a sense of direction, an understanding of the options available to them, and a clearer path forward.

 

Just about every advisor I know uses these terms interchangeably. In fact, they mean very different things.

 

Succession Planning – refers to the plan that ensures the seamless and gradual transfer of ownership, leadership and management of an advisor’s business internally to a new generation of advisor's.

The key point is that the founding advisor's business will endure beyond the life and career of the advisor….and no longer has to rely primarily upon that advisor.

 

Exit Planning – refers to the plan that ensures the transfer of ownership, leadership and management of an advisor's business to an external third party.This transfer is typically a 100% transfer of ownership and means that the founding advisor's business does not endure beyond his or her own career.

 

Contingency Planning – refers to the plan that ensures the seamless transfer of ownership, leadership or management of the advisor's business in the event of a random and unplanned event –death or disability being the most common, but pandemic as well.

 

One plan is neither better nor worse than the other. They are just different.

A Succession Plan at its core is about growing an advisor's business by including another generation of advisor's and leveraging their skills, talent and energy;


An Exit Plan, on the other hand, is about monetizing an advisor's business and bringing their practice to a close and career to an end;


A Contingency Plan is about insuring an advisor's business and preserving its value in the event of a major unplanned and negative event.

 

Conventional wisdom would suggest that an advisor must choose at some point in their career between an internal Succession Plan and an external sale to a third party. This kind of thinking is misguided. A smarter and more effective approach is for an advisor to develop a more comprehensive plan that incorporates all three of the plans described above. Ideally, it should always start with an internal Succession Plan and include a Contingency Plan. In this way, if the internal Succession Plan does not work to the advisor’s satisfaction, an external sale to a third party becomes their fallback strategy.

 

The term Transition Plan, therefore, refers to the advisor’s plan or strategy that incorporates their respective Succession, Contingency and Exit Plans and outlines the process of changing the advisor’s role as owner, leader and manager of his or her business over time to ‘something else’. That ‘something else’ can be whatever the advisor wants it to be aligned with their long-term goals, objective and vision for their life and business.

 

The Bottom Line - what are the key insights advisor's should take from this?

 

  • Every advisor will one day leave their business and exit the industry. Not having a plan in place makes no sense and is a breach of your duty to clients, family members and staff;
  • Start by adopting a different mindset and approach to Transition Planning. Understand the differences between Succession, Exit and Continuity Planning and how they work together;
  • Every advisor, irrespective of age and stage of career, needs to have a Continuity Plan;
  • It is never too early to begin Transition Planning. Every advisor between the ages of 35-50 ought to be developing a Succession Plan;
  • Every advisor over the age of 60 ought to be developing their Exit Plan.

 

Suggested Next Steps – what can advisor's do to get going and enhance their preparedness?

 

  • Get Educated – read up on this topic and talk to one of our coaches to learn more;
  • Get Started – email The Personal Coach to receive a preliminary Self-Assessment;
  • Get Help – connect with Afsar to schedule a Complimentary Consultation.
Subscribe to this Blog Like on Facebook Tweet this! Share on LinkedIn

You're The Coach

You’re The Coach

How to help clients through financial downturns

 

as featured in Investment Executive

 

 

Since the great depression, dips, downturns and nosedives in the financial markets have set investors on edge. In the wake of Covid-19, the razor’s edge has never been thinner. As financial advisors well know, sleepless nights often transform into decisions that are more ill-conceived than prudent. Coaching investors through these uncertain times — before, during and after a crisis — is critical.

 

When the market drops, conversations with your clients become vital. The importance of those exchanges does not wane as a crisis abates or, in the case of the coronavirus, isolation becomes standard operating procedure. “Financial advisors need to connect with their clients to find out what concerns them,” says April-Lynn Levitt, a certified financial planner and business coach with The Personal Coach, which offers customized business coaching for advisors, in Oakville, Ont.

 

Dig deep, advises Chris Hornberger, a certified executive coach in Halifax. “You need to understand your clients’ specific concerns. Identify what they are worried about.”

 

Forward projections help you do that, Hornberger adds. Determine where clients want to be financially (and otherwise) in five years’ and 10 years’ time. Review their financial plans to see if, even in the midst or the wake of an economic upheaval, those goals still can be attained. If not, discuss how a plan could be revised to make them attainable.

 

Taking a step back in time with a client also can be beneficial, says Hornberger. “Ask them to recall a similar time previously when they were concerned. Ask them how they got through it. Ask them how their life — and their finances — were affected.”

 

Coaching clients is fundamentally about building trust. Will clients naturally turn to you after the storm has passed? “That is a measure of their trust in you when they reach out,” says Hornberger.

 

Hornberger adds that not receiving calls from clients is not necessarily a good thing before or after a crisis. “Do not assume if you are not hearing from clients [that] it is because they are not worried. If they do not hear from you, it can create distance.”

 

Looking at the issue from more than one angle and time frame can also help clients put any declines in financial markets in perspective. Covid-19 aside, market downturns are status quo. “Remind clients that we [recently were] in the 11th year of a bull market, which is historically much longer than normal, so downturns shouldn’t [have been] unexpected,” notes George Hartman, CEO of Market Logics Inc. in Toronto.

 

Coaching clients through uncertain times is about more than pointing to longer-term projections. “Play a leadership role when things are bad. Go beyond the investment information. See the big picture,” says Levitt. Coaching is ultimately about building a relationship that will stand the test of time and tumult. That relationship requires ongoing touchpoints as situations change, often at breakneck speed. “Communicate before, during and after,” says Levitt. “Define your market philosophy.”

 

Clients need to know you are there when they need you — and even when they don’t. But during downturns and their aftermath, visibility is paramount. “It’s about sharing. It’s about being proactive,” says Hornberger. “Reach out. Communicate early and often. Reassurance is central to this process.”

 

In situations such as market downturns, when you may be concerned that clients may blame you for poor performance, there’s a natural tendency to be guarded. “Our first instinct is often to defend,” says Levitt. “Our recommendation is to step back. Ask the client what concerns them; then you can offer solutions and advice.”

 

Stepping back can be hard, Levitt adds: “Clients can be confrontational. There is so much uncertainty, and it is not just financial.”

 

Clients aren’t the only ones who have anxious nights when the markets go in unwanted directions. You’re adversely affected in two significant ways. First, you’re worrying about your clients and their concerns. Second, you’re worried about your own business in both the short and long terms. Frightened clients can go elsewhere or exit the investment market altogether.

 

You also must focus on yourself when the going gets rough. “You need to take care of yourself. Meditate, exercise, get out in nature,” says Levitt. “You need to handle the stress and not get sick.”

 

You can feel better knowing you’ve laid a solid foundation for whatever crisis — natural disaster, market crash or pandemic — clients are in the midst of weathering. Indeed, your coaching role begins before there is anything to worry about, says Hartman: “The key to mitigating concern in market downturns is to prepare clients ahead of time for the inevitability that markets will likely be volatile during the time [clients] are invested.”

 

Hartman suggests you make a point of talking with your clients about the ups and downs of market performance during every annual review: “This should include historical performance illustrations, magnitude of decline [and] recovery periods.”

 

Managing clients’ expectations is essential, agrees Levitt: “Everyone will see a slowdown. Before anything happens, you should be talking to your clients about downturns.”

 

It is important to ensure you have a current market meltdown plan in place, Levitt notes: “This does not have to be complicated. If something happens, how can you be ready to reach out and to whom do you reach out personally? This is not a case of sending out just one email.”

 

Your meltdown plan will contain such information as which clients need to be on speed-dial for reassurance and which clients like to buy during a downturn. Your plan also will contain draft emails and templates that can be sent quickly to all or certain clients with little revision. Where appropriate, the information can reaffirm that there is insurance in place and/or a rainy-day fund.

 

“Emphasize [to] clients [that they] are working toward a goal — not reacting to market downturns,” stresses Levitt.

 

Post-crisis is an ideal time to update your plan: review what worked well, what worked as planned and what needs to be revised and rethought. As a crisis wanes, it also is an optimal time for you to identify gaps in your market meltdown plan and ensure those gaps are addressed for next time — because there will be a next time.

 

Your updated plan also must spell out how you will connect with clients, and continue to connect with them if you can no longer get to your office, if power service is more than sporadically interrupted or if concerned clients cannot meet with you face to face — perhaps because much of the community has been shuttered. Literally.

 

Subscribe to this Blog Like on Facebook Tweet this! Share on LinkedIn

Business & Personal Planning for 2019: LATEST NEWSLETTER

Check out our Fall 2018 Newsletter including helpful tips for advisors. This edition is focused on  personal planning, business planning as well as branding for 2019! Please connect if you have any questions or comments. 

 

Sign Up to recieve our monthly tips and articles for advisors. 

 

add a comment
Subscribe to this Blog Like on Facebook Tweet this! Share on LinkedIn

Contributors

Afsar Shah, Business & Regulatory Coach
7
May 12, 2020
show Afsar's posts
April-Lynn Levitt, Business Coach
4
April 3, 2020
show April-Lynn's posts
Alison Ottewell, Marketing Coach
2
February 3, 2020
show Alison's posts
Patricia Giesbrecht, Business Coach
3
November 21, 2019
show Patricia's posts
Fortunato Restagno, Brand Coach
3
November 21, 2019
show Fortunato's posts
Bob King, Business Coach
1
August 30, 2019
show Bob's posts
Heather Amlin, Operations & Efficiencies Coach
1
June 17, 2019
show Heather's posts
Kim Poulin, Business Coach
3
June 17, 2019
show Kim's posts
Art Schooley, Business Coach
1
June 17, 2019
show Art's posts
Kelly Maxwell, Marketing Specialist
8
November 22, 2018
show Kelly's posts

Latest Posts

Show All Recent Posts

Archive

Tags

Everything Newsletter Event Advice Coaching Strategies Human Resources Team Excellence Value Proposition Marketing Branding Contact Management Advisor Skills Personal Effectiveness Leadership Financials Succession Planning Compliance Regulatory Risk Management Referrals Client Relationships Millennials Gen Y Time Management Technology Telecommunications Productivity Forum Magazine Buying/Selling a Business Hiring