Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here.
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Dear Bev,
I am ready to merge my practice with another advisor who I have known for many years. He and I have served as one another’s confidants and backups. We know what the other’s working style is like and we know some of our respective clients. We worked out a financial arrangement a long time ago just as insurance in the event something happened to either one of us.
Legally and financially we seem to be set. Culturally and personally we align similarly. The issue is timing. How does an advisor know when the time is right to make an official move? What am I not thinking about that I should be?
M.S.
Dear M.S.,
The “when” question is a personal one. Are you ready to retire and hand your practice over to someone else? If you are, then ask yourself, why? Is it because from an age perspective it is simply time, or from a work perspective you are tired and ready for something new, or from a personal perspective your spouse or significant other says “it is time!”? It’s crucially important whenever we make a major life transition to consider the “why now?” question and the elements underneath that “why?” Be sure you are confident this is the right timing – for the right reasons – for you.
Unfortunately many times advisors (and others) make decisions to do something because it seems like it is the right thing to do. This is why in many cases people who retire when they aren’t ready become sick or depressed. While you might have the necessary savings, you might not have the right plan for the transition.
If you think you are ready because of other concerns – your health, taking on a second career, spending time with family and the like, be sure you have a plan for what you will do, when and how. I know it sounds crazy to tell an advisor to plan, but like many professions, advisors do the best for their clients but don’t always apply the same criteria or process to their own lives.
When you agree it is time to make the move and your advisor friend is ready to take on your practice and your clients, you will want to have a transition plan for the process. Giving clients time to digest the news and learn about the process is important, as is giving yourself and your friend time to work together and make sure you cover everything you need to think about.
Make sure you are both clear on the financial arrangements post-merger. It sounds like you have talked about this a bit. But I’ve worked with advisors who had a solid idea of what the financials would look like, but then they entered retirement and found the money wasn’t enough or they didn’t think it was a fair split given what they had put into the practice prior to retirement.
I know all of this may sound like it is getting into the weeds, but my best advice is to get into the weeds from an emotional and financial perspective. Think about every possible scenario and plan it out. If your colleague is not willing to do this with you, then you need to rethink whether they are the best partner for this process.
Dear Bev,
We are doing a very poor job of asking for referrals from our clients. As a practice, we don’t believe it is our client’s responsibility to find us new business any more than it is my responsibility to find new customers for the car dealership where I recently bought a new car.
Is this an irrefutable law that advisors must ask their clients for new opportunities?
T.M.
Dear T.M.,
An “irrefutable law” based on whose definition of the law? Not sure where the question is stemming from other than I suspect you have either read something, or someone has told you that the best source of new business is your existing clients (which, based on the percentages, is true). However, does this mean that every single advisory firm can only grow if they ask their clients for referrals? Of course not.
If your firm is growing without the benefit of client referrals, your own system might be working just fine. I have some clients who have very solid direct marketing campaigns and don’t need to rely on client referrals. Others get most of their new clients from excellent COI relationships and others run seminars and workshops to attract new prospects.
There is no right or wrong. The statistics show the preponderance of new clients coming from referrals because, for many advisors, this is the way they are most likely to meet new people. If it isn’t a direct referral, it could be a friend or family member they bring to a workshop or educational event.
In many cases where advisors leverage client referrals, they aren’t doing it in the most effective manner either. The “just ask” tactic often doesn’t work. Clients don’t know who they should ask, or what they should say. It’s better to provide your clients with a description of the types of people you serve, what problems you solve and how you solve them. This is where niche marketing can be so effective if you are more targeted and specific in your approach.
Examine your options as a firm and look at where your new growth has come from. If there are other avenues that work for you, focus on those. There is no one-size when it comes to growth – each firm finds their own way that works for their team.
As long as you are growing, keep doing what is working for you!
Beverly Flaxington co-founded The Collaborative, a consulting firm devoted to business building for the financial services industry in 1995. In 2008, she co-founded Advisors Trusted Advisor to offer dedicated practice management resources to advisors, planners and wealth managers. She is currently an adjunct professor at Suffolk University teaching undergraduate students Leadership & Social Responsibility. Beverly is a Certified Professional Behavioral Analyst (CPBA) and Certified Professional Values Analyst (CPVA).
She has spent over 25 years in the investment industry and has been featured in Selling Power Magazine and quoted in hundreds of media outlets, including The Wall Street Journal, MSNBC.com, Investment News and Solutions Magazine for the FPA. She speaks frequently at investment industry conferences and is a speaker for the CFA Institute.
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