It is no secret that the industry's advisor population has been aging. What is often overlooked is that this is an opportunity for retiring advisors to ensure that their clients will be taken care of after the advisors exit the business, and for younger advisors aiming to serve new clients. All that is needed is proper planning.
In a way, I started preparing for my partner's retirement from the moment I joined the industry.
When I began my career nearly 20 years ago, advisors were attempting to transition their business from a transactional business to that of a fee-based practice. I studied various business platforms and interviewed countless advisors prior to going into production, and I found that a fee-based business coupled with financial planning aligned clients and myself in a harmonious fashion.
I also concluded early on that a practice has to operate like a well-oiled machine. If you tell a client that you will call Monday afternoon, it is imperative not only to call Monday afternoon but also to be prepared prior to the call, so that time is not wasted on either your end or the client's. I scrutinized the tasks I saw myself doing, and then created a process-oriented practice around those commonly completed tasks. For example: setting up a new TP account, entering an incoming account transfer, receiving a referral, meeting for a client review, and updating a financial plan. I listed the necessary steps to each task and converted them into a "recipe" for my team and I to track. Below is a sample of a common series of tasks associated with my clients:
| Type |
From Anchor Date |
Regarding |
Scheduled For |
| To do: |
3 weeks before |
E-mail appointment reminder; include checklist for items to discuss. |
Client Service associate |
| To do: |
2 weeks before |
Mail appointment reminder letter; include directions to the office. |
Client Service associate |
| To do: |
1 week prior |
Update financial plan. |
Gino Stumpo |
| To do: |
3 days before |
Print out shared connections from LinkedIn profile. |
Client Service associate |
| Call: |
2 days before |
Confirm appointment. |
Client Service associate |
| To do: |
2 days before |
Generate portfolio review report. |
Client Service associate |
| To do: |
1 day before |
If out of office appointment, print the financial plan for client. |
Client Service associate |
| To do: |
1 day after |
Send "Client Review Feedback" Outlook template to client. |
Client Service associate |
| To do: |
1 day after |
Post-meeting letter; include financial plan, if one was created or updated. |
Client Service associate |
| To do: |
1 day after |
Send handwritten "thank you" card. |
Gino Stumpo |
Ten years later, my business had grown by a factor of nearly 10. Around this time, I met a financial advisor who was working at a different firm, and he had an interest in teaming up with a younger advisor to help him retire by transitioning his book of business. His practice was primarily transactional, and he did not utilize formal financial planning for his clients. We met a few times and decided to work together once he transferred to UBS. I created a roadmap of how we would transition his book of business. I considered it imperative to be extremely detail-oriented in order to help make the transition seamless and better serve his clients. I analyzed his book of business and formulated a plan to help make the transition where it made sense. There are situations in which a fee-based account platform may not make sense and clients appreciate when you let them know that is the case.
The retiring financial advisor and I set up client reviews as a first step. I met with the clients and gathered all their information from mortgages, outside assets, family, financial goals, concerns, risk profile and more. This allowed us to help create a specific, tailored recommendation, and we met in person or over the phone to discuss the recommendations. We coordinated with the client's tax advisors when dealing with non-IRA assets in order to determine if the client had tax carry-forward losses, decipher whether or not the client was subject to AMT, and so on. I feel that "measuring twice and cutting once" allows for meticulous, time efficient recommendations to be made.
We then contacted clients on a proactive basis and started sending quarterly reports, which displayed asset allocation, performance (net of fees), as well as expected cash flow―a key indicator that our retired clients greatly appreciated.
In regards to market updates, I was focused on long-term positioning. During one of our discussions, we revisited recent trends, including inflation, interest rates, economic data, and how to position ourselves for the future versus making short-term focused changes. The clients at first were not accustomed to these types of discussions, but they very quickly warmed up to these discussions and appreciated them.
In my opinion, taking a multiyear approach makes sense in order to properly transition a book of business. Clients can acclimate over time, and relationships take time to develop. The initial account transfers to the receiving firm should be given full attention, and precise guidance is imperative.
My process includes contacting a client to offer a six-month review about six months after our last meeting and updating financial plans at a minimum every 12 months. I found that clients appreciate the proactive calls. When mailing a client, if the item is administrative in nature, the client would receive a call from the team's client service associate. If the item is about investment or financial planning, the client would receive a call from myself or the retiring financial advisor with me on the line to guide the conversation.
Over the course of the first and second year, the change in the practice was very noticeable. About four years later, from the beginning of the partnership, the production and the book of business changed from that of a transactional practice to one primarily fee-based, with a financial plan completed for the majority of clients. We ran the complimentary financial plans as an added service, as we felt that this would create added value to the relationship.
When my partner was ready to retire, we worked out a four-year succession plan that was based on the current production levels. The retiring advisor moved up to Northern California and we remain friends to this day. In fact, he hired me to manage his own personal investments, and I can say that I am truly honored to have worked alongside him. To this day, the clients are extremely happy and continue to provide referrals as the practice grows.
Today, my production has grown more than 50% since 2013, and my team brought in to the firm $34 million in net new assets in 2016.
-by Gino Stumpo
Gino Stumpo, CFP, is a senior vice president and wealth management and portfolio manager at UBS Financial Services.
