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The Rising Importance of Transition Planning
Tuesday, May 12, 2020
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.
Afsar Shah, Business & Regulatory Coach at 3:30 PM
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.
From a degree in Geology to a career as a Business Consultant later a Financial Advisor, Sandra Schmidt has always been a master of change. Now, she embraces her most recent endeavor - retirement.
A native of London, Ontario, Sandra describes her upbringing as akin to a Norman Rockwell painting. The third of four girls, Sandra, reflects on her childhood as warm and loving. Her father was an actuary with London Life and her mother, trained as a teacher, chose to be a stay-at-home mom, as did many of that generation. Attending church was a big part of Sandra’s childhood, given that her father was a soloist in the choir, and her mother ran the Sunday school. Mostly, Sandra recalls both parents always encouraging their daughters to find their passion, to do it well and to remember that in life, there are no limitations – you can do anything you choose.
Inspired by her parents’ words, after Sandra graduated from high school she followed her father’s example and attended university at Western. There she received her Bachelor’s degree in Geology. A short stint in the Arctic, however, convinced Sandra that spending over half of each year in remote locations wasn’t all that appealing. She decided that a business education might be a path to consider and returned to Western, this time as a student in the Business program. It is here she met the love of her life, Duff Schmidt,
who hailed from the Okanagan in British Columbia. By January of the following year, the couple knew wherever they would go; they would go together. When asked how they decided between British Columbia and Ontario, Sandra says, “Duff said he wanted to be where the skiing was, so
away we went to Vancouver!”
Almost directly out of school, Duff started with Mutual Life in the Estate and Financial Planning Services (EFPS) area. Sandra accompanied him to various corporate events and conventions, and it was there she began to notice the
opportunities available in the financial services industry. Through the years, Sandra continued to develop close relationships with management at the local branch of what is now Sun Life Financial, who would consistently tell her,
“When you get tired of what you’re doing, come and work for us.” Fast forward five years, Sandra knew it was time for a change and left her role in Strategic Planning consulting and in June 2000, her career as a Financial Advisor began.
Though a logical and natural transition, Sandra describes the first few years as an Advisor being “really tough.” Similar to what most advisors experience, Sandra also quickly exhausted her natural market. Prospecting was tough and, in need of people to talk to, she developed a game plan that was strategic and proactive. Scouring her Rolodex, Sandra approached individuals who were well-placed HR managers and could get her in the door for a 45-minute “workplace solutions” presentation. Attendance was high during these
sessions, and Sandra’s genuine approach and willingness to invest her time with clients resonated well and served as a foundation for her future success. At that time, the Financial Centre offered a mentorship program that paired new advisors with more tenured campaigners. It was during this program where Sandra met Al. Al not only served as Sandra’s mentor but soon became her friend and eventual business partner. In 2005, with the
partnership flourishing, they moved to a new location in downtown Vancouver.
In 2008, Al was approaching retirement and in the early stage of his succession plan, which included transitioning out of the individual business. Sandra had already been helping to service many of Al’s clients over the past several years; still, the formal transition was a significant change and Sandra felt that she needed some additional guidance and support. She reached out to a colleague who had been in a similar situation who referred her to The Personal Coach. Sandra says she has always treated her business like a business, but working with Juli Leith offered her a very different perspective on how best to organize, structure and manage her practice. This new relationship eventually led to an even higher level of success for Sandra. “Working with Juli ensured that I didn’t simply double how hard I worked just
because I had doubled my business” Sandra reflects. With her business bustling, ensuring her work-life balance became an even more significant challenge and necessity. At the end of each busy day, Sandra would come home, kick off her heels and sit on the floor in the kitchen and talk to her dog, Molly. “I would tell her all about my day - she won’t share my secrets.” Sandra’s business would continue to grow and flourish and the next 11 years flew by.
During the summers, Sandra and Duff would take some much-needed downtime to recharge their batteries. In 2017, Sandra found that she was growing increasingly less enthusiastic about returning to work. That’s when she knew it was time to start thinking about and planning for her succession strategy. Sandra’s daughter, Leigh, had worked for Sandra’s team as a summer student while studying business at the University of Victoria. Also, Leigh had covered a year of maternity leave for one of the staff. When asked if she would consider becoming an advisor, Leigh replied: “no thanks” – déjà vu from when Sandra was first asked! Leigh and her husband John followed their dreams and moved to New Zealand for two years for John to pursue a degree in winemaking. After returning to Canada, they settled in the Okanagan wine region, and Leigh decided the timing was right and pursued a career as a Sun Life Advisor. She has since taken on Sandra’s Okanagan clients as well as Lower Mainland clients Leigh was already supporting. The balance of her business transferred to colleagues whom Sandra had worked with for years. Citing as the vital element to choosing a successor, “We already had a great rapport, I knew who they were and what their values were. I knew my clients would receive the same level of integrity and respect
as I had shown them”. Sandra is so proud of Leigh and the Vancouver advisors. After her clients had moved to their respective new advisors, Sandra stayed on for three months to ensure it was a smooth transition. In May of 2019, Sandra officially retired. She has since run into former clients and receives emails and cards saying thank you for picking such great advisors to carry on the legacy.
Receiving accolades from her clients isn’t surprising. You only have to hear Sandra speak about her time as an advisor to understand how she cherished the relationships she built. She had several families where she serviced four generations! In her own words, Sandra shares, “It is such a privilege and
honor to participate in a small way in a family’s life – and with such an intimate topic. To be a steward is such an honor”. Reflecting on one family in particular, Sandra can’t help but become emotional. In 2004, the file of two clients was passed on to her - a husband and wife. Eventually, she gained the business of his mother, and then their children and grandchildren, too. One year, Sandra noticed a change with the wife; that she didn’t seem herself. It was then, when the client was in her early 50’s, that she received a diagnosis of early-onset Alzheimer’s. Amid this turmoil, it was comforting that the planning work done with Sandra allowed the husband to take his retirement early to care for his wife up until her passing. When asked what her guiding principle is, Sandra humbly shares, “you must have a solid sense of what is right and wrong. Be kind to one another and do the right thing. Show up when you’re supposed to show up and mostly, be the advisor you’d like to have”. What started as an attraction to business turned into a genuine love for people. “I had no idea how much I would fall in love with the clients. It was never about me; it was always about them”. For anyone thinking about becoming an advisor, Sandra shares the following sage advice “be prepared for the roller coaster. It’s not easy, and there are two tracks on the roller coaster; emotional and financial – they go hand in hand. Know what an honor it is. Clients will tell you things they won’t share with others; it’s all about trust”.
“What we do as advisors matters.”
Since May, Sandra has been enjoying every moment of retirement. She reflects, “I used to hear from retired people and they would tell me how busy they were, and I wondered, how can they be so busy? I don’t wonder that anymore!” With Duff also retiring in the Fall of 2018, their days are spent
enjoying the outdoors, loving time with their expanding family, reconnecting with friends, traveling and truly living in the present.
Sandra, on behalf of The Personal Coach, congratulations on a magnificent career and your retirement!
Insights on how a team is using Everything DiSC® Workplace assessments to create business momentum
Do you believe one of your biggest assets if not the biggest, is your team? If you said yes, so do we which is why at The Personal Coach, we have a process in place to help teams grow stronger. We use Everything DiSC® profiles from Wiley, which are a personalized, specialized and in-depth analysis used to help individuals develop a broader understanding of themselves, their relationships with team members, explore their own potential and realize unparalleled success.
Everything DiSC® profiles help to develop critical business skills such as:
In a team building session, we discuss the results of the assessments and when needed, coach people one-on-one to assist with implementing the necessary behavioural changes. We recently received feedback from a valued client of ours who uses DiSC Workplace to manage their large team. Keep in mind that DiSC is for teams of all sizes. In their case, they have many team members with different personalities and profiles. So, they have benefited from understanding each other's personalities to best work with each team member.
Our client assigned one team member to be the DiSC® Team Leader to make sure that DiSC was not getting lost in the day-to-day to-dos and was remaining an important aspect of their business that they focused on regularly.
Here is what the DiSC® Team Leader shared with us:
THE IMPACT ON THE TEAM, As an organization, it’s the best thing we could’ve done. Since doing the DiSC® profiles for all the team members, we are much more aware and sensitive to each person’s unique communication and work style. We know that different people prefer, and need, different types of communication. We have incorporated DiSC® discussions into our staff meetings every month to make sure team communication and effectiveness remains top of mind for each team member. Since doing DiSC®, it has also motivated us to do even further research on communication styles and working with different styles. We use DiSC® profiles to facilitate better understanding between team members. Sometimes team members with different DiSC® styles can feel like they are not on the “same page” but having another person in the meeting who understands the different styles can help validate people’s feelings and their reactions to certain scenarios. On each employee’s door frame or work station, we have posted “How to Work with Me” so everyone can be reminded about how to work most effectively with their colleagues. The team is encouraged, on a yearly basis, to update this if anything changes in their preferences. We use terms like “Bring out your inner D” (dominance) or “pull it back when communicating with someone who is not a high D.” Not only does everyone know everyone else’s styles but they understand themselves better which only helps team and individual growth.
AS THE TEAM GROWS, Whenever we have a new staff member, we have them complete a DiSC® profile. I go through a detailed account of our initial introduction to DiSC, why we went through it and how it’s helped us to better work together and be a more cohesive team. Once the profile comes back, I discuss it with the new hire. Most people, when they get them back, are surprised at how precise the results are. I also order comparison reports for the new hire and for the people who will be working closely with them. It helps me to identify any issues that could potentially come up. It’s a proactive move so I can have conversations with existing staff prior to the new person starting work.
We are happy to see the benefits that our clients have realized from working with our coaches and Everything DiSC® profiles. If you are a business leader with a team, big or small, you will benefit from Everything DiSC® profiles combined with coaching.
You will discover:
what your priorities are at work
what you are motivated by
what stressors you likely have
what people will notice about you
what your limitations may be
what your communication needs are
Your team will:
have better communication
better understand one another
realize increased productivity
realize increased performance
improve the hiring process
leverage each member’s skills
Please reach out if you would like any further information.
An article in Harvard Business Review on “The Secrets of Great Teams,” highlights the importance of teams socializing together. The study suggested that even the simple act of having employees take their coffee break together increased productivity by 8% and up to 20% in some cases!
Is team building worth it?
The short answer: absolutely! The long answer: an effective team is a productive team. A team that works well together will increase client satisfaction, maintain quality control, and build and grow your business.
The old saying is true: the whole is greater than the sum of its parts.
How can you do team building activities with a small advisory team?
There are many options including:
escape room mazes
zip line, etc.
Keep your team’s interests and abilities in mind.
Do the activities during work hours so employees with young families can still attend, plan the events together, include spouses if your team is very small, and take pictures to share with your clients. Most importantly, remain consistent and plan events year round. The most successful teams do an event quarterly or semi-annually.
Business & Personal Planning for 2019: LATEST NEWSLETTER
Thursday, November 22, 2018
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.