How To Transition Existing Clients To An Associate Advisor

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#OfficeHours with @MichaelKitces Video Transcript

Welcome, everyone! Welcome to Office Hours with Michael Kitces!

For today's video, I want to talk about how you accomplish the internal handoff of clients from one advisor to another. So, if you've hired a new advisor or maybe even a future successor, what's the actual process to transition the client relationship?
This week's question comes from Ashley, who asked:

"I'd love your take, Michael, on how advisors should transition their clients to another advisor. I'd like to hire and train another advisor to service about 100 to 150 of our existing clients, but I'm concerned about making sure the clients feel that they're in good hands with this new person and not like they're being pushed off to a junior advisor."

Great question, Ashley. And this is something I have a lot of experience with because we've actually done this many times over the years at our own firm, Pinnacle Advisory Group, as all of our founding partners at this point have actually transitioned their clients to other advisors in the firm.

I went through a lot of this as well with my work with NextGen years ago and talked to a lot of firms that did this both from the senior advisor's perspective and the junior advisor's perspective, learning about some that did it well and some that did not so well.

My recommendation, and I'm going to talk about this in some detail, is that you view client transition as a three-step process. And one that I find typically takes about three years to do well. Now, if you're selling your practice and making a sale and transitioning after a sale, that typically happens much faster than three years. That's usually 6 to 12 months. But that's normally a very experienced advisor coming in to take over clients.

I'm not talking about a sale and transition to a very experienced advisor here. I'm talking about what I think is the more common process for so many advisors who hit that wall... they accumulate more clients than they can service, they need to hire a junior advisor to support, transition some clients, start moving from practice to a business, and then need to figure out the actual process. In other words, how do I extricate myself from these client relationships, and transition them to a junior advisor?

My recommendation is to plan for a three-year process that I call the three L's: Listen, Learn, and Lead.

Stage 1: Start By Listening [Time - 2:20]

The first step of training an associate advisor is simply to give them the opportunity to participate in meetings and listen. The associate won't necessarily say anything yet, they're just going to listen. Because the reality is that, there's a lot to be learned just by listening to client meetings.

They can observe you as the experienced advisor and see how do you handle meetings. How do you handle questions? How do you direct a conversation? How do you explain typical talking points and topics that come up in client meetings? In short, they can watch your behavior and what you do so that, in the next stage, they can actually start applying what they've learned by interacting with clients.

Now it's worth noting that even in the listen stage, there is work the associate advisor can do as well. They're effectively going to function similar to a paraplanner at this point, but maybe a little bit more client facing, a little bit less back office, because the goal is, ultimately, to have them taking over those client relationships.

But still note that, for an associate advisor in the listen stage, they can take notes on every meeting and be responsible for entering in the CRM afterwards. They can prepare meeting agendas, they can do follow-up notice to clients afterwards, and, most important, they should be the one to research and handle all those miscellaneous questions that come up in the meeting.

The client says, "What's the status of my 401(k) rollover?" Or,  "What's my R&D this year?" "Can we do an update on retirement projections?" Having the associate advisor do that follow-up work is critical because it's the first step to building trust and rapport between your associate advisor and the client.

Because the point here isn't just for the associate advisor to be an administrative contact. If you want to establish trust and have clients work with the associate advisor, you need to give that advisor the opportunity to demonstrate their competency and build their credibility with the client. And answering those kinds of one-off questions is a fantastic way to start that process.

Stage 2: Learn (By Talking And Doing) [Time - 4:12]

As you approach the second year of transition, we go from the listen phase to the learn phase. And the reality is, how do we learn best? We learn by doing. The goal at this phase is that it's time for the associate advisor to get to start talking more in the meetings.

Hopefully, there's already been at least some communication between the advisor and clients, because the advisor was already sitting in meetings for the past year and has already been doing some email and telephone communication follow up with clients... about all those meeting takeaways and miscellaneous planning items. That was the point. The client was getting a little more familiar with the advisor. But now it's time for him or her to start talking.

The first path to this is, when clients start asking those financial planning questions at the meeting, you can steer it to the associate advisor. When the client says, "Should we be doing a Roth Conversion this year?" Your first response is, "Well, Jeremy, what do you think about that?" And let that associate advisor respond.

You're still there and you can make sure they don't say anything horrifically wrong, but the reality is your associate advisor should have already completed their CFP education. They're probably fresher on a lot of these technical rules and questions than you are. They may not be the best at delivering the information yet – that's what takes practice that they're going through now – but they should know it. They should know the answer.

Second, have the associate advisor explain or deliver some planning strategies that you're going to be recommending, with their name on the agenda as the person to guide that stage of the meeting. If you know there is going to be a recommendation to the client about doing a Roth Conversion, plan to have the associate advisor lead that conversation. He or she can explain the Roth rules, how much the firm is recommending they convert, the process for doing it, the next steps for moving forward. Again, you're still there to make sure the client isn't confused... you make sure that nothing is being misexplained, but this is a crucial opportunity for the associate advisor to practice in a controlled environment with your supervision.

It's worth noting as you do this in the firm, particularly as you get started, you can cherry pick who you're going to have your associate advisor talk to first. In other words, start with the clients you're most comfortable with, the ones you know are most likely to be accepting, and then gradually, over time, you can expand the number of clients throughout that second year as the associate advisor gets more practice, and you can let him or her lead more of those interactions with clients.

One crucial note in this phase, though, is that there is a popular piece of research out there that says, in order for someone to become an expert at something, they need 10,000 hours of practice... the infamous 10,000-hour rule. From computer programmers, to musicians, to I think learning how to be a good financial planner.

But a key aspect of that research is that, it's not just any 10,000 hours. It doesn't mean suck at something for 10,000 hours and suddenly you'll get good. It means 10,000 hours of practiced exercise, with feedback and with guidance to reinforce what you're doing well, and to fix what you're not.

My suggestion is that at the end of every client meeting, you take 5 or 10 minutes to do like a check in. Talk about what went well in the meeting, talk about what didn't. Where were the problems? Give the associate advisor a chance to ask questions. Maybe they want to know why you answered the client's question this way and not that way. Give feedback as the senior advisor. "Jeremy, you explained the Roth Conversion rules well, but did you see where the client looked confused when you talked about how you determined the recommendation to convert? That's something you still need to explain more clearly. Here's my suggestion from my experience."

The point here is that practice plus feedback is exponentially more effective than just practice and floundering around alone. And in fact, I know some advisors who in doing this transition start those check-in meetings from the very first stage, even all the way back in the listen stage. The advisor isn't even talking at the meeting, but it's still an opportunity to teach. The advisor saying, "Did you notice how I handled the client's concerns about performance?" That's an opportunity to train associate advisors so that when they get to that phase, they've got some guidance about how to field those questions.

One question I just saw coming here on Periscope was:

How should the associate of advisor inject themselves into that conversation?

I think the reality, if you want this to go well, it's not up to the associate advisor to inject themselves into the conversation, it's up to the senior advisor to inject the associate advisor into the conversation.

Because the reality is, there's kind of a three-way power dynamic that emerges between experienced advisor, client, and associate advisor. If an associate advisor just keeps trying to inject themselves, unfortunately, it's going to come across as a nuisance. It's going to come across as though they're trying to get themselves in.

If it is going to go well, the lead advisor, the senior advisor has to drive it. Because when the senior advisor says, "Well, Jeremy, what do you think?" And invites them into the conversation, it doesn't just provide literally an opening for Jeremy to talk and do his thing, it implicitly endows the experienced advisor's power, authority, and trust that they have with the client, to tell the client that they can trust the associate advisor's answer because the experienced advisor told Jeremy to give the answer. And that power dynamic is crucial in having these transitions work out effectively.

Because otherwise, the client doesn't connect and doesn't really perceive authority of the junior advisor, they keep looking to the senior advisor, and then as the senior advisor, you can't extricate yourself from the meetings because you haven't actually relinquished the power.

Stage 3: Let Them Lead [Time - 9:45]

The last stage of the process is to let the associate advisor actually lead. This means the associate advisor sets the agenda, the associate advisor actually leads the meeting, kicks off the conversation, goes through the talking points with the client in each area, and does the wrap-up at the end. And now as the lead advisor, your job is to sit and listen. You can intervene if necessary – if there's a serious problem – but if you want the transition to be successful, you need to help the associate advisor be successful.

If the client asks you a question, steer back to the associate advisor. If the client asks you what you think, affirm that you agree with the associate advisor. The client is trying to figure out the power dynamic when they see the associate start to lead and you start to back off. And that's the most crucial challenging moment of the transition.

As the client realizes that this new person isn't just a support person, it's their future advisor, as the experienced advisor, you have to be openly supportive of the new advisor, right there in the meeting in front of the client. Because the client is going to be looking to you to affirm, is this really a good transition? Is everything okay?

If you express doubts about your associate advisor in the meeting, the client will have doubts, and it's just flat out not going to work. Which means, even if you have feedback, if you have constructive criticism for your associate advisor, provide it in the check in after the meeting. Don't do it in the meeting unless it is absolutely crucial to intervene. Because every time you override your associate advisor with something that you say, you take them down a notch in the eyes of the client, and it communicates to the client, that other advisor isn't really in charge. You, the experienced advisor, are still in charge. And guess what? Then they're not going to accept it if you're not in the meeting and you try to transition because you left yourself in charge.

Telling The Client They’ve Been Transitioned? [Time - 11:28]

One of the other common questions I get on this theme of transitioning clients to an associate advisor is, how or whether you actually tell the clients you're doing it. And honestly, I've seen this go both ways. Either way, I would not tell the client the first time the associate advisor shows up in year one or even in your two. "Hey, this is Jeremy. He's going to be working with you in the long run."

Because if the associate advisor hasn't had a chance yet to demonstrate their competency, to start building trust, to establish rapport with the client... then when you tell the client in year one, "Hey, this is your future advisor," You're asking them to make a decision right there about whether they're happy with that transition. And the reality is, if the new associate advisor is new and inexperienced, then they have no connection because they only know you. When you tell them, "I'm going to leave and I'm pushing you to that person", and the client doesn't have the trust yet, the client's going to start thinking about leaving immediately.

For the early years, this is simply someone who's here to help us serve the client better. After a couple years of serving you better and having that go well, then in year three, it's about transitioning to the associate advisor to take the lead. And when you do that transition, again, I can't emphasize this enough, as the experienced advisor, you have to talk positively about the transition.

The client is looking to you to understand whether this is a good thing or not, so you have to tell them it's a good thing. You can start by either telling the client the associate advisor is being promoted to full advisor. And if you notice they have such a good connection between the advisor and the client already, you're going to let him or her take the lead going forward. You can still reinforce, that you're still going to be around and available, but follow it with, "And Jenny is so great, you probably won't even need me because she's going to take care of everything that you need."

Because remember, the point of transitioning is to make yourself not necessary to the relationship. If you stay every client relationship, you will hit a wall with your practice. You cannot grow into a business. You have to let go of those relationships to move forward, if that's the transition you want to make.

And the truth is, if you were doing well in stages one and two, then the client's already figured out that you'll become the figure head and the associate advisor is the one who gets stuff done, that's why you give them all the follow up tasks coming out of the meetings in the first year or two. I've known some advisors where the transition plan actually happened faster because the client bonded so quickly with the associate advisor who got all the work done. The client just started calling the associate because that was the person who got the stuff done. I mean, they figured it out for themselves.

It's worth noting that there are some advisors that do this more, we'll call it "gently". In year three, they still don't do a formal transition to the associate advisor, they just do it more subtly. Maybe they say, "Hey, I've got a conflict that came up for our next meeting, but Jeremy is going to come out and see you." And they might just meet with Jeremy the associate advisor and not you, and they're being transitioned.

Personally, I'm not a huge fan of that approach. I think it's fairer to the client to be clear with them and being there in the meetings lets you see what's happening and affirm you're still comfortable with it and reinforce the client that's a good thing. Because ultimately, the associate advisor still needs your support. If you do the version where you're missing from the meetings and the associate advisor does more of them, at some point that may have been over a couple of years where you begin to bow out, even though you never formally said it or acknowledged it. But you're actually going to make it harder because the client's going to be looking to you to figure out whether this is a good thing. And if you're not there to reinforce it, it undermines the new advisor.

Set Up Your Associate Advisor For Success [Time - 14:56]

Ultimately, I find that most advisors are way more worried about transitioning clients than is actually merited. We all like to tell ourselves we're indispensable to our clients and that's why they stick with us. Because of this, you really will feel scared as you let go of relationships. I warn any of you that are looking at doing these transitions, it will freak you out when you start transitioning clients successfully. Because it implicitly means you were not actually critical to the client relationship.

And I want to caution you to be careful about how you react in that moment because I've known a lot of advisors who botched client transitions because when they realized they were making themselves irrelevant to the client relationship, it freaked them out and they started responding in negative ways. They didn't even realize it, but, you know, when you start feeling that power slip away, it's almost a gut response, particularly for a lot of us that are very driven entrepreneurs, to try to reassert your power and your authority. And when you do it, you undermine the associate advisor and you ruin the transition.

Conversely, if you want to make this work, the single greatest factor in determining whether clients transition successfully is if you convince them it's good for them. I's up to you to convince them that this associate advisor is really good at what you do, which means a couple of things. Number one, don't call them a junior advisor. I actually hate that term. Call them an associate, especially if they're younger, because calling them junior undermines their credibility and accentuates their age, which is probably already a point of anxiety. When they're ready to take the lead, call them a full advisor or a wealth manager or whatever main title it is that you use.

Number two, cut out the age jokes. This is the one where you make a movie reference that you and the client remember and then joke about how the associate advisor probably wasn't even alive to get the movie reference. It's a way of reasserting your power and authority in the relationship. And it may seem funny to you and it may make the client laugh, but it reinforces the youth and the inexperience and the lack of seniority of your associate advisor, and it damages the transition.

Simply put, if you want the transition to work, you need to spend all your time talking about your associate advisor is like a wunderkind, and brilliant, and does great work for clients, and on and on. Because again, the client has the relationship with you and the client trusts you, so if this handoff to your associate advisor is going to work, it happens because you make the implicit recommendation and your client trusts you. It's the last great trust recommendation you're going to make to your client.

In the end, even with the best of intentions, there will be a few clients that resist and you'll have to make a business decision. You might keep a few personally if their assets or revenue merit it. You might have to just say no if you can't and tell them you're not a fit anymore. And saying no is hard. It's hard for all of us, but the reality is, you can't serve everyone, and you can't grow a business staying tied to every client, and especially the early clients.

You can be respectful of early clients and try to do right by making sure the firm serves them well, but you did not commit to being their advisor for life because you took them in year one. That's a limiting belief we inflict on ourselves that's not a real client expectation. And don't kid yourself. You've probably moved to the point where you're not actually a great fit for them anyways at this point, because they may be an older client, they may be a smaller client, and there are other advisors, including the great one you just hired, who can serve them instead.

I hope that helps provide a little food for thought around how to transition a client to your associate (not junior!) advisor. This is Office Hours with Michael Kitces. It's normally 1:00 p.m. East Coast time on Tuesdays, but unfortunately, I was traveling for speaking this week, so we're a day later than usual. Thanks for joining us and hanging out, and have a great day everyone!

So what do you think? Is a three-year transition best for transferring clients to an associate advisor? What makes a transition go well? Have you ever had an experience that didn't go well? Please share your thoughts in the comments below!