If you’re planning for the future, it’s worth giving serious thought as to whether your house – as well as your books – are in order.
In fancy business speak, this means streamlining your processes as part of your succession planning.
But do you have a plan in the first place? Whether you want to train up an existing staff member or you’d rather sell the firm – or even if you haven’t quite decided yet – some kind of succession plan is pretty important.
Yet a 2018 study from the Financial Planning Association in the US and Janus Henderson Investors found that only 27 per cent of advisers have a formally documented plan in place.
Some advisers say a succession plan is like a firm’s own financial roadmap. Without one, clients can be left with a disrupted service, higher fees or even no advice at all. And if you’re giving clients advice, setting a good example should be a priority.
It’s daunting, understandably, to prepare an exit strategy. But one way of getting ahead is making sure all documents are filed online.
In the recent past, handing over the reins often meant handing over filing cabinets and entire rooms full of paper. Many client records have to be kept indefinitely, even once the client and adviser have parted ways. Client relationships can span years, if not decades, of monthly and annual reviews, updated client agreements and other forms.
For a new owner, it can be akin to inheriting your grandmother’s house and then finding out she was in negative equity and left 70-plus years of tax returns in the attic.
Nobody wants to get the magnifying glass out to decipher a client agreement from 1979. Being online means less dust, and less sneezing.
Technology today means every single document can be stored on an online portal. Instead of handing over thousands of files, advisers can use one provider to safely store documents that clients can access in their own time. Any changes made are in real time, and there’s no need for the back and forth that endless posting of letters can demand.
A streamlined system also saves time, physical office space and administrative burden. If you choose a tool to help you manage your client relationships online, it's worth checking whether it integrates well with other tools which will reduce the likelihood of having to rekey the same information into several systems.
You may not be quite there yet when it comes to automating things like client onboarding and execution. But it’s still worth thinking about the fact that younger clients demand access to their finances 24/7, and younger staff who might take over the running of your business will most likely be fully used to working in the digital age. Working with the future in mind ensures your firm has longevity.
Focus on transition, not value
Going back to the 2018 study for a moment, it found that of the succession plans created, most were focused on the value of the business, rather than the transition of the business.
But I would argue having that transition in good order is critical. It ensures your business is scalable, and you are more likely to retain staff and clients for the long term.
Advisers can reduce costs through automating many behind-the-scenes processes that took hours, if not days, to do manually. These are all attractive points for that future owner, who may be weighing up the pros and cons of taking over your business, and will give your firm an edge over more traditional competitors.
When it comes to the new adviser or head of the business contacting clients to let them know about the transition (if that's how you're choosing to communicate the move), an online system keeps all their personal details on hand. The adviser is also notified if the client makes a change to their information, or sends them a message.
Thanks to smoother communications, that 'key person risk', where the firm goes into meltdown when somebody leaves, should become less of an issue.
Time flies, doesn’t it? Now you’re ready to hand over the keys, or perhaps to put it more aptly, the username and password.