Move clients into your book

By Christopher Mason | December 12, 2012 | Last updated on December 12, 2012
4 min read

With all the competition for new clients, it’s often easier to grow through acquisition than spend time wooing prospects.

But after you buy the right book, you’ve got to make sure people stick around.

“If clients never hear from [the advisor] and then get a letter saying, ‘We’ve sold our business, we hope you stay,’ you’re on thin ice,” says Alan Atkins, who sold his business, with offices in Barrie and Parry Sound, Ont., in 2008.

As the sale date approaches, you and the seller should prepare joint correspondence for all clients, emphasizing the benefits of the deal and reasons the buyer was chosen—such as similar investment philosophies, a shared assistant, nearby offices or previous experience working together.

Follow up with meetings. The seller should introduce you, and reiterate your extra services, ability to provide more, or different, products, or broader expertise.

“I have qualifications my predecessor didn’t, so in those joint meetings he would very kindly emphasize that,” says Sherry Cavallin, a senior financial planner at Assante Financial Management in Vancouver, who bought a book from a retiring advisor in May 2012.

This boosts your profile, but can run the risk of clients wondering what they were missing under the previous advisor. So, before buying, make sure clients are happy. That way, they’re more likely to see new expertise as a value add.

Business transitions can take at least three years, and typically take about five.

Soon after Roger Thorpe joined his family business in 1997, he began buying shares in the firm. By 2005, he owned 60% of the shares and they decided to finalize the deal. His father continued on a shared-commission basis for three years to complete the transition.

Good communication will ensure you and the seller remain on the same page throughout the process.

“We talk with people about instances where an older advisor brings in a younger advisor and promises a succession plan that turns into a semi-retirement,” says Andrew Marsh, president and CEO of Richardson GMP.

“We’ve seen advisors say they’ll leave in three years, and then three years comes and they’re still there. That can be very damaging to the relationship between partners and their clients.”

Elliot Muchnik, CFO for Richardson GMP, adds an involved seller means higher asset retention.

Cavallin began participating in her predecessor’s client meetings in late 2011; she’d stay about 30 minutes to allow for a proper introduction.

“He would give me the Coles Notes on the client [before each meeting], so that as he led the meeting I could ask questions and add things like, ‘I understand that you have a daughter…’ to build the relationship during the meeting.”

She then scheduled 90-minute followups with each client, without the predecessor present. She met two to three clients per week, and it took about five months to get through everyone.

“The second meeting was more me asking questions and really trying to get to know the clients better,” Cavallin says. “A few clients were more direct in their questioning. They wanted to know about my investment philosophy. It was a chance for them to see my level of interest in them and their portfolios.

“The sooner clients start considering you their primary contact, the easier the transition.”

In solo meetings, Cavallin took clients through compliance documents, did fresh risk-tolerance tests, and reviewed portfolios and goals.

Fortunately, “there were no surprises based on their risk-tolerance results,” Cavallin says—again, pointing to the importance of prior due diligence.

She also used these meetings to introduce her preference for portfolio services over choosing individual funds.

“There’s been a lot of cleaning up of portfolios, [because] the former advisor had used a hybrid of individual funds combined with managed portfolios,” she says. “That would have been difficult to manage if some clients’ portfolios still had individual funds when most of my existing clients did not.”

Cavallin chose a transition pace that let her balance the needs of her existing book, and hired additional staff ahead of the deal in anticipation of her expanded duties.

To make things easier, “What I do with my old clients I do with my new clients,” she says. “Don’t put that off, otherwise you’ll be stuck trying to manage two systems.”

For example, she streamlined client information by bringing new clients over to her existing electronic file-storage system.

Six months after taking over the book, the process is still ongoing.

The staff

During your initial client interviews, figure out whom they see as their primary contact—clients are more likely to leave if that person doesn’t stay on after the sale.

Then, meet with each staff member to discuss the transition, and be sure to discuss the staffer’s future with the business. Go over how they should answer questions from clients about the transaction and talk about changes to any office procedures.

“My [selling] condition was that any staff who wanted to stay got an equivalent or better job,” Atkins says. “You can change ownership and change the sign, but if clients see the same staff, they’re less likely to jump ship.”

Atkins interviewed each staff member, asking where they saw their futures. That way, “When I spoke with the incoming buyer I could indicate where I saw staff going,” he says.

He then told staff he’d guaranteed their jobs as part of the sale agreement to erase any doubts.

If you identify a staff member whose presence is crucial to client retention, acknowledge their role immediately via a raise or promotion.

For Cavallin, the process was smoother because she already shared an assistant with the seller.

“She was very reassuring to clients,” she says. “It was also helpful to me because our assistant could often answer a question I had, instead of having to call up the former advisor.”

Christopher Mason is a Toronto-based financial writer.

Christopher Mason