What Happens Next? Why This Question is So Important

When choosing to get help from a wealth advisor, people understandably seek an experienced, trusted advisor on whom they can rely for as long as might be needed. This can sometimes present a dilemma: Some of the most experienced wealth advisors may not have a great deal of “runway” left in their expected professional life. Even those who say they have no intention of retiring are not exempt from the reality of death, health changes, potential incapacity or family pressures.

If you are a prospective new client for a wealth advisor, you may well feel reluctant to commence a relationship if there is a strong likelihood that they face an undefined transition as soon as five to 10 years down the road.

Common sense is appropriate in addressing this issue. When interviewing wealth advisors, this is a subject worth discussing, particularly if the person across the table is clearly equal or greater in age than you. Your conversation should include discussion about “what’s next?” After all, it is time-consuming to go through the learning curve associated with engaging a new or successor advisor, and you may well prefer not to do this more often than absolutely necessary. The specifics of this conversation can be different depending on the type of advisor or advisory firm you might be interviewing, so here are some tips.


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The ‘Solo’ Practitioner

You might be interviewing a solo practitioner. Though not impossible, it is challenging for a solo practitioner to successfully transition a group of trusted clients to another professional. Make sure you obtain a clear understanding that the process envisioned for the transition of client relationships is well thought-out and realistic. Some potential questions for your prospective advisor might be:

  1. Are there specific individuals already identified for the role of succession when the time comes?
  2. What is the experience, credentials and training of these individuals?
  3. How specific are the details of the proposed transition? Is there a pre-determined financial arrangement already identified for the envisioned transition of client responsibilities when the time comes?

Small Boutique Practices

Many financial advisory firms are small “boutique” partnerships with two or three professionals providing the majority of advisory services to clients. Such a structure can afford the opportunity for enough depth to provide a reasonable answer to the “what’s next?” question.

Of course, if all the professionals in such a firm are your age or older, any perception of strength in numbers might be somewhat misleading. Hopefully, there is some range in the ages of the professionals that leaves room for possible transition of client relationships. Nonetheless, here are some possible questions to pose to the person or people across the table from you:

  1. From the outset of the relationship, will I have interaction with more than one professional in the firm? A transition at some future point in time will obviously be more comfortable if you already have some level of dialogue with the new person who will become the primary financial advisor.
  2. Does the advisory firm have a pre-determined formal financial structure in place to actually facilitate the transition of client relationships when it becomes necessary? Hopefully the details around fees and compensation for the work involved in providing financial advice are already in place and you will not find yourself as the third party in the middle of a business negotiation.
  3. What are the future growth plans of the firm? For a boutique practice to successfully transition client relationships between advisors, there needs to be sufficient capacity for the younger advisors who may be succeeding to the responsibility of your relationship to accept the workload involved.

Larger ‘Ensemble’ Practices

Larger financial advisory firms are generally referred to as “ensemble” practices. This term describes a firm that brings together multiple professionals who collaborate and share responsibility in servicing the firm’s clients. Support staff is in place to assist in that effort. Such structures generally provide the best probability that succession can be successfully accomplished. However, you cannot judge a book by the cover alone, so there are nonetheless questions to ask:

  1. Is the “advisory firm” truly a firm? This may seem like a silly question. However, many financial advisory practices that market to the public as ensemble practices are in actuality a collection of solo practitioners or small boutiques who choose to office together and share expenses. In such arrangements, it is common that professionals tend to come and go over time, as there is no true common culture to tie them to the organization. “Succession” in this environment may in fact be very much akin to changing advisory firms altogether.
  2. Will I have interaction with more than one person at the firm? Just like the question for the boutique practitioner referenced earlier, you should know whether you will be interacting with multiple professionals within the organization from the outset. This allows you to gain familiarity with the possible successors to your relationship.
  3. How is the advisory firm organized? Understand the “infrastructure” of the firm and whether there is truly an institutionalized strategy for work flows and processes. Your best chance for a smooth transition from one advisor to another is a firm where all the professionals have a collaborative system for formulating advice and recommendations and there is some consistency in how financial problems are addressed. While the personality and style of your successor advisor might represent a change, the basic underlying planning and strategy decisions should be consistent.

Concluding Thoughts

At the end of the day, it is not always possible to make a “forever” decision in choosing a financial advisor. You must stay engaged in the relationship even as trust and confidence builds over time. At key transition points, it is important to be aware of any cues that you might pick up that would signal need for a re-evaluation.

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J. Harold Williams, CPA/PFS, CFP®

J. Harold Williams, CPA/PFS, CFP®

J. Harold Williams is Linscomb & Williams' Chairman.

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Investment Advisory Services are offered by Linscomb & Williams, an SEC registered investment adviser, and a subsidiary of Cadence Bank. Linscomb & Williams (L&W) provides financial planning, investment management, and retirement plan and investment consulting services. L&W is not an accounting firm, and does not provide tax, legal or accounting advice.

Information expressed herein is based upon opinions and views of L&W and information obtained from third-party sources that Linscomb & Williams believes to be reliable, but Linscomb & Williams makes no representation or warranty with respect to the accuracy or completeness of such information. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.