Executive Summary
As the average age of a financial advisor remains 50-something and rising, along with it is a rising need to not only attract and develop the next generation of financial advisors, but actually begin to transition clients to them. However, while it’s difficult enough for advisory firms to simply recruit next-generation talent at the early stages of their careers, it can seem even more challenging to transition existing clients to them. Nonetheless, advisory firms are going to have to tackle these transitions if they want to continue to grow and, ultimately, to retain clients as their founders and experienced advisors retire.
Yet while there’s been a lot of discussion from the senior advisor’s perspective about how best to manage this process of transitioning clients, remarkably little has been written from the viewpoint of the up-and-coming advisor about how best to prepare and position themselves for a successful transition. Accordingly, in this guest post, Jack Rabuck from West Coast Financial recounts his career path so far, from starting out as an entry-level analyst fresh out of college, to becoming the de facto point of contact for newer clients, and then gradually growing into a lead advisor role with 65 existing clients and $165M of AUM in just five years by the age of 27… and the steps he took to ensure the transition would be successful.
Because the reality is that there is a lot that paraplanners and associate advisors can do to better prepare themselves for success, by trying to gain more of their own knowledge, exposure, and experience. From actively seeking out opportunities to sit in on meetings with as many different advisors as possible, to paying close attention to how they actually manage meetings themselves, becoming an expert in highly specific topic (effectively creating a micro-specialization for themselves), focusing on learning as much as possible, and being brutally honest with oneself about areas for needed improvement… the more the new advisor positions themselves for success, the more duties and responsibilities that can be taken on in a relatively short period of time.
Of course, there will often still be challenges, and Jack shares some of his own challenges experienced and the key lessons learned along the way, that any advisor can seek to apply to advance their own career!
In 2013 I was 22 years old and fresh off getting a degree in Finance. I was hired at an RIA with 10 employees to be its third “financial planning analyst.” I barely knew what that meant. I certainly had no idea that five years later I’d find myself as the primary advisor for 65 relationships, managing $165 million of discretionary assets. Of course, I don’t do it all myself; I’m extremely lucky to work with two client service associates and two financial planning analysts who constantly find ways to bring joy to our clients and let me focus my attention where it is most impactful.
When I listened to the office hours video that Michael put out a little over a year ago about transitioning clients from a lead advisor to be managed by an up-and-coming next-generation associate advisor, I loved it. He touched on so many facets of my work life that I had never heard discussed before.
That video mostly covered what the older advisor could do to increase the odds of making the transition successful, and rightly so. In my opinion, the biggest factor is the effort put in by a client’s long-time existing advisor. That’s where the trust in the relationship lies.
However, there is another crucial factor, at least in my estimation… and that’s the competence of the younger professional, especially the ability to connect emotionally with clients.
When I reflected on my own experience, I was struck by how much the fascinating blend of circumstantial luck interwoven with my own intentions dictated my journey. If I had been hired at another RIA and tried to make exactly the same efforts to develop myself as an advisor, I would doubtlessly be in an entirely different place than I am now.
While I don’t think there is only one right way to develop from a green analyst into a professional advisor whom people are willing to trust with their aspirations, fears, values, and of course, life savings – I do think there are certain themes to follow and pitfalls to avoid.
Here is my journey.
(Side note: Throughout this post, I’ve purposefully avoided the adjectives “junior” and “senior.” I am very sure they are damaging to a potential transition, regardless of whether the client hears the words, because they can create implied (and negative) perceptions around the “junior” advisor’s capabilities. Occasionally you’ll see references to “younger” and “older” advisors, simply to differentiate who is being referenced. Although, clearly, a client transition could go the other way, too.)
In the Beginning
Early on, likely well before any formal transition is even discussed, being active and even proactive is vitally important to a young analyst’s development.
Take good notes on what you like about what the current lead advisor does or says in meetings, and be sure to consider the reason(s) why. You can take these notes for yourself right in the meeting; the client will never know the difference between notes for yourself, and the notes you use to follow up with them. And also you can (and should) literally take “meta” notes about how the advisor runs the meeting and guides the client to identify the best practices you see. I used to write metaphors used to explain concepts to clients that I heard and liked in the margins of my notes, so I could remember to try them out myself the next time the situation arose.
The absolute ideal is to get experience sitting in on client meetings with multiple advisors. If you're at an ensemble firm, this is likely something that gets talked about all the time but happens very rarely in practice. Don't rely on asking the person you work with primarily to make this happen; you'll need to actively seek out opportunities to work with other advisors. Do not expect anybody to want to add another silent body to a meeting just for the sake of giving you exposure, even if that idea is talked about as an ideal. It won’t happen. If you want to get into their client meetings, bring them something that makes them want you in the meeting with them.
For instance, create for yourself a mini-niche, perhaps an expertise in a specific event that affects several clients. A couple of years ago, the University of California system changed investment options, and you can bet that every advisor in our firm wanted the analyst who did the legwork on the new investment options to sit in on their meetings with professors that year. Build some excellent materials, know the details front and back, and offer to be a part of the next meeting with other people whose clients are affected, and you’ll get your foot in the door with multiple advisors and their client meetings.
I was fortunate. In just the first year I was working, I was able to sit in on client meetings with four different advisors. They each had their respective strengths and weaknesses, and I learned something from each of them. All successful advisors have a style, both in front of the clients and when doing the preparation behind the scenes. Look closely, and you will find something to emulate from just about everybody.
Try new things that you learn when you get the chance. When trying to grow, it is often better to ask for forgiveness than permission. If you can write a follow-up email, write the email. If you’re uncomfortable sending it because you aren’t sure you understood something, write a draft for the older advisor to edit. If the client asks you a question you can address in a meeting, go ahead and answer it. Let the older advisor fill in any gaps you left or add subtlety to your answer. In your post-meeting debrief (you should insist on these, and lead them), if there was a question that you wanted to answer yourself but didn’t, mention it. Then, the next time it comes up, speak up in the meeting. But remember, if you wait until you feel like you’re an expert before you get your hands dirty, you’ll probably never begin.
When you’re new, it is your golden opportunity to ask questions; nobody expects you to already have the answers. It is one of the great ironies that people, myself especially, seem to miss this window for fear of being seen as naïve (which of course, everyone knows you are, so you may as well embrace it and take advantage of the learning opportunities)!
Educate Yourself
I don’t mean this in a narrow sense; there isn’t a book of facts you can memorize that will make you a credible advisor, although I do have a few specific recommendations.
As a Finance major, I could discount cash flows with the best of them. But I came into the job knowing nothing about pensions, payroll taxes, or even common questions about retirement.
Evaluate yourself. What do you do well? Poorly? Knowing what you’re good at and where you are weak lets you improve yourself. I happen to love multiple choice tests and am a very fast reader. I studied for the Series 65 exam using the question bank (that comes with the Kaplan Series 65 program) every day for a month.
Moreover, I recommend a study buddy for any test you’re taking. Another analyst and I started studying together for the CFP® exam in 2014 before we took it in July 2015. It was tremendously helpful having prepared for the exam with a study buddy. I also studied for this one mainly using the question bank that came with the Dalton Review program, but the other analyst had a more balanced approach. I knew which was the right process for me.
Whenever I need to study for anything, keeping up momentum is huge. For example, I see much better results when I study every day for a month, rather than every other day for two.
We’ve had many employees pass the test since then, and they all found their own balances between reading the books and answering sample test questions, between studying for a long time or cramming it in over a shorter period of time. Don’t feel the need to do what other people have done exactly how they have done it. Instead, learn from their successes and failures, but don’t be afraid to do what you know is right for you.
I continue my education by reading a litany of blogs and industry publications every morning because it is by far the fastest way for me to consume information. For other people, podcasts or other mediums might be better. I still remember the excitement of Bob Veres' Inside Information coming out each month when I was new to the industry, and every piece that I read felt like an epiphany.
But I have a few enormous weaknesses, too. I’m an introvert and a pretty slow learner when it comes to social cues. I have to get something wrong before I get it right. I still walk away from some interactions, and only thirty seconds after I’ve left do I realize they asked me about my weekend expecting me to ask them about theirs!
Having the ability to be more extroverted is a skill worth developing, even if the extroversion is just for a short time. I strongly recommend that other introverts work on increasing their extrovert battery life – it can be incredibly fun and professionally rewarding to mingle at a conference or with potential clients – and it’s a skill that can be built with practice.
Similarly, I never had much occasion to speak publicly, so when a group of four of five people from the office decided to join a lunchtime public speaking workshop, Toastmasters, and asked if anyone else wanted to come with, I went. It was a wonderful experience that was entirely outside of my comfort zone. We stuck with it for a year or two, and I must have practiced speaking 50 different times in front of audiences of over 25 people. All that repetition has paid very nice dividends.
Phone calls used to be a nightmare for me. I was horrendous on the phone when I first started. One of my manager’s (and later, groomsman’s) favorite stories is about the first time I answered the phone from an outside caller. I think I got as far as saying “Hello, this is Jack,” but got stuck there. I frantically waved my arms like one of those inflatable things outside of a car dealership, put whomever it was on hold, and got some help. I’m now much better on the phone, but it didn’t come with time – only practice.
Fortunately, I managed to keep my job because I wasn’t totally useless. I was very good at Microsoft Excel, modeling financial scenarios, and written communications – if you’re great on the phone but terrible in Outlook, spend your time working on your writing instead. Everyone comes to the game with different strengths and weaknesses, and frankly, everyone starts so far from proficient at most aspects of the job that where you start matters much less than how much you work on your abilities.
Now, Those Promised Specifics
First, you'll have to acknowledge to yourself that there is no substitute for real experience. However, you'll quickly find that a few years of condensed experience in a niche makes you much more expert in that area than generalists (even with 20+ years of experience) who only look at your niche once every year or two.
Second, be aware of the relevant history of the financial services industry, because there are some things that you really need to know about. The tech bubble in 2001 and the great recession in 2008 are absolute minimums. You should probably also be familiar with (the crash of) 1987, Alan Greenspan, and what bonds and interest rates looked like in the ‘70s and ‘80s. A strong knowledge of where we have been (and if your clients are of the baby-boomer generation or older, what they lived through) makes you much more conversant.
You should also keep up to date with what's happening day-to-day in the world. The expectation will be different for each firm and clientele, but if there's a new Fed chairperson, you’d better know that person’s name (it’s Jerome Powell, but you call him “Jay”). Clients expect that you will have at least a conversant familiarity with this information when you’re responsible for their life savings!
Now, it's very important that the dynamic is right when these conversations come up (especially ones about the past). As Michael mentions in Office Hours, the older advisor can totally torpedo you here, but you can cut that off at the pass. Should you make a joke about the 'Nifty Fifty' and get a slight pause from the client in response, point out that you weren't alive, but you're a big market history buff. Everybody wants their financial advisor to be a little bit nerdy; again, it instills greater trust with clients when they’re more confident that you really know your stuff.
Similar to the condensed experience from a niche, just being at an RIA for over 8 hours a day means you see people's financial situations all the time, but your client probably only thinks about his or her own. It's very powerful to be able to walk clients through the options that others in similar scenarios have considered, and explain how they reached a certain decision.
If something you said or a reference you made seemed awkward, ask about it in the post-meeting debrief that you’re leading. The feedback might surprise you. Sometimes something that feels awkward to say is just the right thing for the client to hear – profound, even.
Leading
Ah, leading. If you have been at your firm for a while, preferably gotten your CFP® designation, and have at least some mini-niches for yourself (mine was file-and-suspend strategies while they lasted, and boy did we ever make hay while the sun shined!), at some point you’ll look around and find yourself doing a lot of the talking in at least some of the meetings. You might still be the “second chair”, but the client can see who did the legwork and who knows the details.
Once the client starts to lean on you for advice based on the competency you’ve demonstrated in your (albeit potentially limited) domain of expertise, you’re making the transition from analyst to advisor.
For me, leading interactions with clients started before I was officially the primary advisor for a client in any of our internal systems. It happened earliest with clients who joined the firm after I did. To them, I was (and had always been) the person with the answers – often responding to their emails and returning their calls. Eventually, they would drop by with a quick question or call me when the primary advisor wasn’t around. They were always plenty happy to speak with me.
I was fortunate in many ways when it came to opportunities to begin leading. Our firm shifted the analysts from a “bullpen” approach to supporting advisors to a dedicated team approach (with a couple of interim shifts – management was learning, too). I ended up supporting an advisor who was always good about letting me step just outside of my comfort zone. It didn’t hurt that he was one of our managing partners, and now that we have 35 employees, is our de facto CEO. He was almost as excited as I was for me to get to a place where I was ready to manage client relationships (because it freed up his time for his growing responsibilities, too!). Of course, having some of our firm’s biggest relationships involved, he was more than a little wary not to cut the cord too soon.
One big change I would make from the way we transitioned relationships (and still do for the most part) would be to start by having new relationships fall under the younger advisors earlier, before a major transition of long-term clients. The mistake I see is that firms wait until they feel the time is right for the younger advisor to be the primary contact for an entire client base, and only then giving the young advisor full responsibility for any (and all of the) clients all at once.
In reality, there are many burdens and tiers of responsibility that can escalate over time: touching base with these clients, maintaining the portfolio, making sure you don’t “drop the ball” on anything, all of which lies on top of the rest of the planning. If those responsibilities ultimately fall onto the primary advisor in your CRM, even if they can be delegated, it is an enormous shift to go from being responsible for 0 to 50 clients. It’s much better to increase from 0 to 10 or 20 clients earlier than you might otherwise be totally comfortable so that when you end up with 50, it isn’t a shock. It also gives the younger advisor a chance to find out what works for themselves and what doesn’t without as much pressure.
Once you get a chance to lead a meeting, lead! Have an agenda and walk through it with confidence. Speak purposefully and say what you mean. Don't say 'approximately' when you mean 'exactly.' Pay attention the next time you speak with a good attorney, they are very good at speaking precisely. Don’t be afraid to pause and wait for an answer to a question. This advice applies whether you’re waiting to formulate your own answer or are giving the client time to organize his or her thoughts.
Work on developing your written communication style. Find the best parts and pieces from those around you – bullet points, paragraphs, stories, ability to connect, whatever – and then take it for yourself and make it your own.
For the first couple of years, I was mostly in our portfolio and planning software and running spreadsheets. Now, it seems like I spend all day writing emails, talking on the phone, or helping analysts figure out what scenarios to look at (with the aforementioned software and spreadsheets). Communicating is now the biggest part of my job.
Create a niche and area of expertise. Even if it doesn't directly apply to most of the clients with whom you will work, it will give you a natural place to begin taking the lead. The older advisor will want you to (and give you the chance to) be running the show for clients with situations where you are the real expert earlier than any others.
I developed a niche working with our clients with assets of a level that meant they needed to plan around the estate tax. I was up to date on the latest strategies and legislation, and able to translate between attorney, CPA, and English for our clients and advisors. I also ended up working through most of the business transactions and recapitalizations that our clients have been through over the past 5 years. Of course, the first couple of times aren’t much more than a ride-along, but it is amazing how much you can take off a client’s plate just by knowing the right questions to ask them and the other professionals in the room at the beginning of a planning or transaction process.
At least half of the clients I work with are the classic RIA demographic – retiring in the next 10 years or retired in the last 20 – who are looking for us to help them make sure they won’t run out of money, invest wisely and within their risk tolerance, and do smart financial planning. I think I’m quite good at giving the clients what they want here, but if I’m being honest, so are most of the advisors at my firm. The place where I add the most unique value is those areas with less overlap in advisor expertise because I’ve developed my own specializations.
In addition, if your firm is anything like mine, and you work mostly with clients I described above, the value you can add is mostly in the preparation, not in suggesting overly complicated planning that might add a lot of stress and comparatively little value.
Another thought on niches and specializations: You can have an area of expertise that doesn’t tie directly to planning. For example, I’m the chair of our fixed income committee. The portfolios are managed at the advisor level, but ultimately there is $350 million of fixed income investment that the rest of the committee and I are responsible for guiding our strategy on. Especially when introducing yourself to potential clients who are getting their first impressions of you, being able to explain the role you play for your clients (i.e., who you work with and what you help them accomplish) and your role (and areas of major responsibility) within the firm itself is something I’ve found instills a great deal of client confidence.
If you don't have an internal strategy meeting with your teammates who work with that client (e.g., older advisor, client service associate, etc.) a few days ahead of your client meetings, I strongly recommend that you start. Especially as the analyst or associate advisor, these strategy meetings are the perfect place to prove you've thought through all of the facets of a client’s situation. For example, know whose birthday is coming up, that they had their third child nine months ago, and that they need to file for Medicare six months from now. Even if you're great at the technical stuff, if you don't know the clients, they are never going to think of you as a true “advisor”, and the older advisor probably won't feel comfortable letting go, either.
If you’ve done your preparation before the meeting, usually you’ll be rewarded with a meeting that is enjoyable for you and valuable for the client. But your work isn’t done yet. You should debrief after the meeting. Of course, cover what you need to do next for the client and who is responsible, but also reinforce the good things the older advisor is doing to help the client see you as a valuable member of the team and ask them to stop ones that are counterproductive. This is probably their first time transitioning, too. It won’t be perfect.
Official Transition
When beginning the official transition, communication is more key here than anywhere else. Especially in the early stages when the older advisor is just beginning to drop out of the loop. Perhaps have a weekly or biweekly meeting to give them an update on any client matters and ask advice. You may think they’re just “old and grey”, but they probably have something worth sharing! And just asking once in a while reassures them that if you need their help, you won't be too proud to reach out, which is important for them to have confidence in and support your success in the transition.
Now, if you've been doing everything I’ve written about above, a certain number of the clients will already be thinking of you as their “main person” at your firm. Nonetheless, I agree with Michael's point of view that being explicit about the transition is best. As soon as the older advisor is comfortable with it, have them confirm with the client that they are moving to more of a mentor role, but are available as much as necessary. It’s much easier to breathe without an elephant in the room.
My own experience with the transition was much less explicit. I was functionally the primary advisor for most of the clients for a year or more before the older advisor stopped regularly attending meetings and it started to become “clear” to clients they had been transitioned. At some point, the clients became listed with me as the primary advisor in our CRM system, and the older advisor only attended meetings when I wanted him to (which was almost always at first, and eventually almost never). Still, very rarely was it explicitly said to clients that I was now the main advisor for the client. As a firm, we’ve learned from my transition, and a few others that happened around the same time, and we are now much more explicit when changing primary advisors.
Having seen the process in my own experience and with others at my firm, I’d recommend a staggered and flexible approach. You can transition all of the clients in your internal CRM and other software on a single day, but when it comes to the real relationships, there will be some percentage of clients who are totally fine with the older advisor never talking to them again, others who will want the older advisor to be in all of their meetings for the next 5 years, and others who lie somewhere in between. It is almost always obvious who is who. Give the clients what they want, at least for a reasonable transition period, but be sure to be clear with the stragglers what the dynamic is – you don't want them to feel led on.
In Closing
I’ll close here by saying again that everyone’s experiences will be different. I was extremely fortunate to get many of the experiences I had and to have had the freedom to push myself early on. Being in client meetings from week one was immensely helpful. So was being CFP® certified after I had two years of experience.
I am also lucky that the clients with whom I work are overwhelmingly the kind who value expertise and ability, regardless of the source. Ultimately, the people you have around you make a world of difference. Whether it’s the older advisor making the transition, the rest of the clients’ support team, or the firm’s back office, if you don’t have the backing of your colleague(s), you won’t be able to earn the trust of your clients. Don’t take any of them for granted, and learn what you can from each of them.
My final piece of advice: Take the opportunities that come your way and create the ones that you want most. There’s not one best path from analyst to advisor, only your path. Shape it for yourself.
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