James BodeThere are financial advisors who, after years of cultivating a client base and looking to sell their practice, tend to look at the sale as a transaction. It’s easy to fall into thinking that selling is about making the ‘best’ deal or finding a ‘good buyer.’
Here at Beck Bode, our experience of buying several practices has shown us that the transaction itself is possibly the easiest part of this process. What many sellers don’t give as much thought to are the operational changes that have to happen for a smooth transition, as well as the emotional changes associated with the sale of something that has been an important part of your life for so long.
If you’re thinking about one day selling your practice, here is some food for thought on how your role may change once you find a buyer.
As I was thinking about writing this, it made sense to me to think of two aspects of change: changes in responsibility, and the emotional changes that are a result of going through such an important life event.
5 Tips For Navigating the Sale of Your Financial Practice Beyond the Transaction
#1: Prepare Clients for a Seamless Transition
A successful transition is based on a successful handoff of clients to the buyer.
Getting ready for a sale should begin years before you find a solid buyer. One of the key things you’ll need to do (again, hopefully years in advance) is to introduce the idea that you are planning for the succession of your practice, much like your clients are preparing for their retirement.
Once you have found your buyer, as the seller you will need to share with your clients all the reasons they will be in good hands even after you are gone. How well you do this will affect your clients’ experience, and it will also impact you and your reputation.
Keep in mind that retention of assets is extremely important to both buyer and seller as most transactions have a retention bonus built into the contract.
#2: Transition Away from Day-to-Day Operations
Operational responsibilities for the practice need to be handed off to the buyers as soon as possible and in a way that feels seamless to your clients.
Your due diligence as a seller should include making sure the buyer is prepared to take over managing your practice from day one (even if it doesn’t happen on day one, they should still have the infrastructure and team on hand to do so as needed).
As the lead financial advisor (assuming you own the significant relationships in your practice) your sole focus will be on ensuring client retention (see #1 above!), so you should not be spending any more time on operational issues.
#3: Adapt to Changes in Product and Service Offerings
We have found that cultural fit is the most important aspect of a successful transition from seller to buyer. That said, the product and service portfolio, and general philosophies on what is offered to the client and how – these are important things that may change as the practice moves from one owner to another.
Changes in investment philosophy can be tricky to navigate with clients, as there are so many different schools of thought on how to manage money. In our practice, we like to meet with clients first and explain the benefits and our investment philosophy before making any changes to their portfolio.
You will need to stand behind whatever product and services the buyer represents, even if those are different from your own.
#4: Adjust to Technological and Vendor Changes
There are so many different financial technology platforms these days that changes in technology are almost inevitable when a practice changes hands.
If you and your team have become accustomed to doing things a certain way, or if your existing tech stack is deeply integrated into everything you do in your practice (as it would be in a well-run practice), it’s possible that you may need to make some shifts to your software as you transition.
The same goes for other vendors that provide your practice with critical services.
#5: Facilitate Smooth Transitions with Custodial Partners
It’s pretty common for account custodians to change during a transfer of ownership of a practice.
In any event, regardless of changes in custodial relationships, clients will need to acknowledge and agree to the management of their accounts by the new owner(s). This will mean signing new documents, which is nowadays all done electronically.
Still, it goes back to my first point, which is that you as the owner are the champion behind the new owner and will want to do whatever you can to ensure that this process goes as smoothly as possible.
Emotional Readjustment Post-Sale
Manage The Emotional Impact of Selling Your Practice
As financial advisors, we are in the business of helping and advising people.
Speaking from personal experience, I take pride in the advice I give people and I know for myself that I thrive on people “needing” me to some extent. Now think about what it’s like for you to work with clients.
How emotionally attached are you to your clients? It could be that your role of financial advisor has become a big part of your identity. What will it be like to no longer be the lead advisor, or the owner? What will you do with all the time and space in your life when you are no longer heavily involved with your practice?
Letting go can bring up a lot of emotions.
Remain Engaged as a Supportive Leader
I can’t say this enough: The better the transition goes for your clients, the better it will be for you, for your team, and for the buyers, of course. Everyone benefits from a smooth change in ownership.
For this reason, it’s important for you to not ‘check out’ even while you are giving up day-to-day responsibilities. The best transition experiences for us have been those where the seller became a cheerleader for Beck Bode and remained involved for as long as we had agreed upon.
Very few clients will walk away if they see that you stand behind the people to whom you decided to sell your practice.
Embrace Your Evolving Role After Selling Your Practice
Hopefully, this gave you a sense for some of the ways your experience as a financial advisor will change once you find a buyer for your practice.
Early on in my career I realized that to have long-lasting relationships with our clients I needed to become the center of their universe. So I did everything I could to make that happen.
Every good financial advisor wants to be their clients’ “first call” on anything that’s financially related. The downside of that is that when you sell, you will no longer be their first call.
Preparing for that is one of the most important things you can do as you think about your succession plan. Visit our step-by-step guide on succession planning for financial advisors to learn more.
James Bode is Managing Partner at Beck Bode, a deliberately different wealth management firm with a unique view on investing, business and life.