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Also available as podcast (Episode #116)
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How To Explain To Clients Your Transition To The RIA Model?
The most critical part of a transition is successfully having your clients follow you on your new path for your practice. While there are legal considerations that must be considered and navigated as well, one of the most important steps in the process is how you will initially explain your move to your clients. There is a balance between providing them with the needed information to make an informed decision, while not overly and unnecessarily complicating the process either.
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Full Transcript:
How to explain to clients your transition to the RIA model? That is today’s question on the Transition To RIA question and answer series, it is episode #116.
Hi, I’m Brad Wales with Transition To RIA where I help you understand everything there is to know about why and how to transition your practice to the RIA model.
If you’re not already there, head to TransitionToRIA.com where you’ll find all of the resources I make available from this entire series in video format, podcast format. I have articles, I have whitepapers. All kinds of things to help you better understand the model.
Again, TransitionToRIA.com.
Today’s episode is an extension of a prior episode I made where I discussed how to explain the RIA model to your clients, to help them understand the difference between an RIA, a broker-dealer, what a custodian is, etc. Feel free to check out that episode as well.
This episode is about how to explain to clients when you’re reaching out right at the transition point, how to explain to them your new path. What are the things you should say, not say, those sorts of things.
This is not an exhaustive list of everything that could be relevant, but I have nine tips that I frequently talk to advisors about.
I will start with the caveat, though, that some of you potentially have non-solicit or non-compete language in agreements you have signed with your current firm. That needs to be researched, needs to be considered. You need to know how to navigate that process.
If you have such clauses, it doesn’t mean you can’t necessarily make a transition, but it impacts when you say things, how you say things, how you contact clients, etc.
This topic is something I walk advisors through. It’s important to bring in legal guidance as well. I can walk you through that.
For simplicity with this episode, we’re going to assume you’re not in that situation, or you’ve already gone through those steps and you know how to navigate it successfully.
So everything I say going forward, I’m not going to keep repeating the same disclaimer over and over again about being careful if you have non-solicit type language to consider.
Now for the tips. This is when you are reaching out to clients. You’ve left your firm, you’re reaching out to clients to explain your new path. And obviously you’d like them to come with you to the new path.
First tip, do not bash your prior firm.
Even if you’re already fully independent, even if you don’t have to worry about non-solicit type considerations, it’s never good to bash your prior firm.
You might have reached a point of extreme frustration with them, or over the years things have gotten worse, perhaps the service has got worse, or maybe you no longer like the people that are running it. No matter what the circumstances are, there’s little to nothing to gain by bashing your prior firm.
As a starting point, your clients might wonder, if that firm is so bad, why have you been with them for so long and why has my account been with them for so long?
Help yourself, don’t even introduce that concept into it. There’s nothing to gain.
Don’t poke a sleeping bear. You’re moving on to greener pastures. You’ve gone through a whole process to reach this point and decided making a transition is in your best interest, is in your client’s best interest. This is exciting and you should just be looking forward. Even if you have grievances, let it go. There’s nothing to gain.
I’ve seen some advisors do some very stupid things that have come back to haunt them, sometimes in significant fashion. No matter how independent you might think you are, and think they can’t do anything no matter what you say, just don’t do it. There are enough positive reasons for why you made the step.
The second tip, while there are a lot of reasons you as the advisor might be making this move to the RIA model – which I talk about on a lot of these episodes – at the end of the day, all that matters to your clients is what’s in it for them?
As you think about how you’re going to explain the move to clients, and while there are reasons that benefit you and your team as well, your guiding light should be…what’s in it for them? What are they gaining by this move?
Your ability to incorporate new and better technology, that you’ll be rolling out to them in the months following the transition. Or access to additional investment resources and solutions.
To put it bluntly, they don’t really care what’s in it for you. But what’s in it for them, because you are asking them to go along on this new path with you.
Next, tip number three.
As you have perhaps already done, mentally or literally put your clients into the proverbial A, B and C buckets. Which at first would seem to be your order on who you’ll be reaching out to first.
However, I suggest advisors and teams first reach out to maybe five, ten, three, whatever number you want, B clients first.
The reason is because the more times you explain this, the more conversations you have with clients, the better at it you will get. Your very first call is likely going to be okay, but it’s not going to be as good as the fifth time you explain it, or the 10th time.
So essentially, practice if you will, on some B clients first. You could even start with C clients, but for the sake of time, you don’t want to go too far off track from your top clients.
Practice a few times on those B clients, get your spiel down, and you will very quickly get to the point where you’re absolutely comfortable, absolutely confident in how you’re describing it. And then by all means, shift to your A clients and start going through them and you’ll feel much more confident and polished in how you’re communicating the message to them.
Tip number four. This one applies more to advisors/teams that are already independent, because of the additional client information you may be able to take with you.
I’ve worked with advisors that map out a multifaceted communication plan involving phone calls, emails, I’ve even heard of an automated text component as well.
What I recommend is if you’re using such a multifaceted approach, there is a subset of your top clients that are presumably very important to you and your practice. They’ve been good clients. They’ve been loyal to you. Those clients arguably deserve to hear the news of your new path from you first before they get notified via the same email that perhaps a few hundred other clients get.
So, think of which clients you want that to include. Ideally it would be all clients, but because it might make sense for an email to go out relatively soon after you’ve resigned from your prior firm, you don’t necessarily have the luxury of time to do that.
You don’t necessarily even have to formally talk to all those top clients. You might get their voicemail, and can leave a message. But you’ve at least checked that box and they will know you attempted to contact them before they got some email that appears to have gone to everyone. You’ll get credit for that in their eyes.
Tip number five, don’t say any more than you need to.
Now, at first that sounds like I’m suggesting you hide something. No, there’s nothing to hide. You can fully explain this to clients and help them understand why you’re making this change. I’m not saying hide anything.
Most of your clients are going to be excited for you. Most of your clients are going to be “sure, just tell me whatever you need me to do, click on some buttons, fill out some paperwork.” They’re going to go along with it.
If you in turn, though, kind of word vomit, if you hit them with an eight point bulleted explanation of why you’re making this move, perhaps they weren’t going to have any concern at all about this, and now because you’re sitting there draining on about eight different reasons this is good for them, they might start to have a concern.
I often share an analogy from a dentist appointment I had earlier this year. I’ve been going to the same dentist for 10 years. They’re fantastic, I love the whole team. I’ve never felt they were suggesting anything that wasn’t appropriate or that I didn’t need for my teeth.
Recently they told me I needed a more intensive treatment and the hygienist was explaining it to me. I was like, “sure, no prob.” Now, I wasn’t excited about it, as it’s not necessarily fun to do, nor was I excited about having to pay for it. But again, I trust them. I’ve been going to them for ten years.
But the hygienist kept laboring on about why I needed the treatment. She even went and got the dentist to explain it as well. He comes in and gives me all kinds of reasons I need it as well.
I finally interjected and said… “Guys, I’m onboard. I trust you. But you’re starting to make me think I perhaps should be more worried about this. I wasn’t worried about it the first time you explained it, but the way you’re going on about it, it makes me worried that maybe there’s something I should be worried about?” But that wasn’t the case at all. I didn’t need to worry.
I don’t know why they overloaded me with information. I guess they thought it was helpful. But the point is, don’t overdo it where it doesn’t need to be overdone.
Again, you’re not hiding anything. Just don’t overdo it when it doesn’t need to be overdone. Maybe you have some clients that are engineers, who will want the eight bullet points and that’s fine. You know who those clients are, and you can hit those folks with the full eight bullets.
But don’t overdo it with the other clients. There’s no reason to cause concern where there isn’t any need for concern.
Number six. As you work through this process of contacting clients, you can’t be on the phone with each of them for half an hour. There won’t be enough time in the day in the first few days of the transition to do so.
Considering all the clients you need to be reaching out to, you need to find a way to keep the conversation as concise as possible. Now, you don’t want them to feel rushed. Obviously your top clients, to the degree they want to keep talking and keep asking questions, you might need to make it a little bit of a longer phone call. But when you have a lot of clients to be reaching out to, you can’t make all of them really long.
Again, go back to what I just said. It shouldn’t be a long call due to you spewing off eight different bullet points and topics. You want to explain what you’re doing, ask them if they have any questions, explain next steps, and most of time they’re going to be fine and ready to move on. That’s it. Wrap the call up, proceed on to the next. You don’t have enough time to make it a lengthy call with all your clients.
Number seven.
Something I’ve heard some teams do, they will type up – it’s usually like a one-pager – an FAQ. It’s some common questions they feel their clients might have and they’ve spent the time to write out those questions, write out thoughtful answers, kind of word-smithed it, made it look nice, got a nice little graphic design on a one-pager.
If a client maybe expresses they want some more details, or they’re not understanding something, or they’re wanting the call to go a little longer than maybe you’re able to accommodate, some advisors want to be able to say… “I have an FAQ, I’m happy to send it to you after our call. It will give you a little more detail. But after everything we’ve said together here, after you’ve looked at the FAQ, if you still have questions, please get back to me and I’m happy to address them with you.”
That’s a way to shorten a call if you need to. And a way to accommodate that engineer client that wants more details.
If you like this idea, you don’t necessarily need to proactively send it to every client. Again, you’re not hiding anything. But if there’s no cause for concern, which there shouldn’t be on their part, there’s no reason to introduce some variable that might introduce unnecessary concern, which would then take you time to have to further explain and help get them comfortable with.
But it might be good to have available for those circumstances where you feel it is needed. That is something I’ve seen some folks do.
Number eight, related to this, have a clear plan for what you are communicating to the clients as to what comes next right after you hang up the phone.
You want to be prepared to say… “so and so on our team is going to send you an email and it will have the exact three steps I need you to please do from here”, or whatever those needed instructions are. Clicking on a link, signing a docusign, etc.
First, have that process ready to go. Have your team ready to go, so the minute you say… “Mr. and Mrs. Jones are ready to go, I’ve spoken to them”, your team will kick off the next steps.
And practice how you will explain these next steps to clients. You want to give them that quick primer on here’s what will follow once I hang up the phone. What are those next steps. Make sure you have that dialed in.
The final tip I’ll give is try your best to not fear how these conversations will go.
I recently made an episode on some of the most stressful parts of transitioning to the RIA model, if you want to check that episode out.
There’s always some stress regarding, are my clients going to follow me? I talk about that a good amount in that episode, so I won’t say it all again here, so go check that out.
But advisors do generally (initially, at least) fear these phone calls with clients. Until you’ve done one, until you’ve done five, until you’ve done 10, until you’ve done 20, it’s going to be new, it’s going to be something you’ve possibly never had to explain before. So there’s often need to get comfortable with it.
Countless times I’ve had advisors and teams understandably express a degree of anxiety leading up to the resignation date for all kinds of reasons. “How are my clients going to take this? How is it going to go?”
I said this in the recent episode as well, but any advisor or team that has done their homework, researched their new path, done their due diligence, started their own RIA or joined an RIA – and we’re talking months and months of work – if you’ve got that far (and a lot of folks might not make it that far. They might realize this is not for them and that’s the end of it) but if you’ve made it that far, the overwhelming amount of your clients are going to follow you.
There’s almost no instances I can recall in my 20+ years where someone got through all of that – and by the way we’re not considering someone with a termination type situation – but advisors who went through a methodical, well thought out process, I have not had an instance in the 20 years where they did all of that and then they made the move and they were wildly off on how many clients followed them compared to how many they thought would. Where they thought 90 to 95% would, and only 30% did. I have not experienced that in my 20 years.
You will likely be in that same bucket where you will fear it, and your fears will turn out to be unfounded. Just like you might have some anxiety over how the initial client conversations will go.
I get it, it’s easy for me to say don’t worry about it. You’re the one that must make those calls. I sympathize with that. But I can’t tell you how many times, it’s usually weeks after the initial transition date as they’re so busy by the time we can catch-up, where advisors tell me the calls went a lot easier than they feared. Their clients were so receptive to it. They realized their fears were completely unfounded.
There are always potential exceptions. I don’t want to say this happens with 100% of every scenario. That’s why it’s so important to work through all these steps with someone like myself that can make sure you’re thinking all these things through.
The final thing I’ll leave you with is a line, that I don’t even remember where I first got this from, that relates to how you’ll explain your move to clients. Without bashing your prior firm, without trying to suggest that wasn’t a good solution for all the years perhaps you were there, etc.
A line I often suggest advisors think about, maybe you wordsmith it a little to be more in your voice, but is to basically say (to your clients)… “As the industry continues to evolve, I owe it to you to make sure that I continue to evolve my practice to keep up with the changes in the industry. Hence, this is why I’m taking this next step, blah, blah, blah.”
And that’s true. Go back a couple decades, it was all stockbrokers. Everything was transactional. Everything was commission-based. That’s typically not the case anymore. It’s wildly changed. The industry does change.
A lot of those folks, perhaps you were one of them if you’ve been around long enough, have had to evolve with it. It’s quite reasonable to acknowledge the industry has evolved. And you continue to evolve.
It’s a way to explain that what has worked for the last couple years, or maybe longer, perhaps it’s no longer the best path considering how the industry has changed.
You haven’t bashed your prior firm. You’ve just said you, and in the interest of your clients, need to continue to evolve as well.
As I said at the top, my name is Brad Wales with Transition To RIA. This is the sort of thing I help advisors with. Everything from the very beginning, should you even be exploring this model, to all the things you need to be thinking about and doing to make it possible to reach this point where you’re picking up the phone and having conversations with clients. I can help you as well.
First things first, head to TransitionToRIA.com where you’ll find all the resources I make available from this entire series in video format, podcast format. I have articles, I have whitepapers.
At the top of every page is a Contact link. Click on that and you can instantly and easily schedule time to have a conversation with me whether you want to talk about today’s topic, or anything else RIA related, I’m happy to do so.
Again, TransitionToRIA.com.
With that, I hope you found value on today’s episode and I’ll see you on the next one.
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