Transitioning Current Clients to a New Service Model

Journal of Financial Planning: May 2021

 

Charesse Spiller is the founder of Level Best, which empowers financial planners and entrepreneurs by teaching them how to level up their operations.

As the financial advice industry continues to evolve, I’m seeing a steady increase in the different types of services that financial planners offer to their clients. From a business perspective, this allows planners to tailor their services to their unique clientele or offer services that better meet their personal needs and lifestyle goals as a business owner. From a client’s perspective, the wide variety of services means they can find a planner who offers exactly what they need. In other words, this change is a “win” for firm owners and consumers alike.

However, as firm owners start to transition their service model, they continually run into one glaring problem: How do you transition current clients to a new service model?

Most planners feel that changing their service model for current clients will mean clients leaving as a worst-case scenario, and a major logistical headache as a best-case scenario. This doesn’t have to be the case. If you select a service model thoughtfully and organize your operation ahead of time, you can successfully transition current clients with minimal frustration.

Understand Which Service Models Are Available

The first step you should take when considering new service models for your practice is to do your research. There are many different service models available and combining multiple options to create something custom may be the best route to serve your clients efficiently and effectively. You can’t make a thoughtful decision about transitioning your service calendar or fee schedule if you don’t know what options are available to you. Let’s explore a few different financial planning models that I often see planners pivot toward.

Advice or Expertise Focused

The biggest shift I’m seeing in the financial planning profession is planners pivoting toward a service model that prioritizes their expertise, not tangible deliverables. This is often more of a mental transition than anything else, but it can come with many different changes to your service calendar depending on how you want to structure your new, expertise-focused business.

Many financial planners don’t realize how valuable their expertise is to their clients, so they overcompensate by adding increased touch points, quarterly reports and deliverables, and other tangible benefits for their clients. Those things aren’t bad—far from it—however, if you look at the core of your business and decide you want to focus exclusively on providing financial expertise and advice, looking at a one-time plan or ongoing financial-planning-only services may be a good fit for you.

Investment Management

There are still consumers out there who only want their assets managed and don’t need a full financial plan. These prospective clients are often do-it-yourselfers who have a good handle on their financial goals and money management but feel less confident when it comes to managing their portfolio. They’re looking for expertise, just like a one-time plan client would be, but are focused exclusively on their investments.

This service model may stand alone for financial planners who only want to focus on investment management, but it can also be used to supplement advice- or expertise-focused financial planning services.

Comprehensive Financial Planning

This is the top-tier, high-touch financial planning service that many planners and firm owners are working to systematize and roll out to their best clients. Comprehensive financial planning is time consuming, and often comes at a premium for consumers who are interested in a fully outsourced solution. Financial planners interested in a lifestyle practice also leverage comprehensive financial planning to build a small but mighty book of business.

This service model includes all services—an initial financial plan, comprehensive financial planning in an ongoing capacity, ongoing investment management, and accountability touch points to keep clients on track. Often, comprehensive financial planning firms also coordinate with other key professionals for their clients including (but not limited to) tax professionals, estate planning attorneys, and insurance agents.

Financial planners who pursue this type of service model often name it something along the lines of comprehensive or holistic financial planning, wealth management, or “personal CFO.”

What Pushes Firms to Switch Service Models?

If you’ve been happy with your service model for a while, you may question what would push a financial planning firm to transition how they run their business. After all, it’s a drastic change that often comes with a full overhaul of their operation—including processes, workflows, and technology.

When speaking with financial planners who are considering making some kind of a service model switch in their business, two things usually stand out to me:

No. 1: They’ve Had a Change of Heart

This is the more emotional or psychological motivation behind a dramatic business change. When push comes to shove, business owners just aren’t in love with the work they do anymore. Maybe they don’t find their current service model fulfilling, or they want to find a service model that’s less high-touch to free up time and meet their lifestyle goals.

They might also feel pulled to reorganize their service model to reflect fiduciary responsibilities they’re passionate about. Please know that if you’re making business decisions for personal reasons, you are still doing the right thing for you and your company. A financial planning firm can’t run effectively if the owner isn’t fully invested in and committed to the way things are run, and the way both they and the team serve their clients.

No. 2: They’ve Found a Better Way of Doing Business

Whether they’ve found that a different service model is more profitable, more efficient, or just draws their ideal clients more effectively during sales conversations, the impetus for switching may be purely a business decision. Business-related reasons for transitioning your service model might be:

  1. You’ve outgrown your existing clients who no longer fit the way you offer advice or deliver expertise. Many people will tell you that your clients will “grow with you.” This isn’t always the case, and if you’re interested in pursuing a new type of service model that doesn’t fit a large number of your “original” clients, it may be an indicator that you’ve outgrown them and are ready to start referring their business to other planners who can serve them and be excited to do so.
  2. You’re interested in serving a different client base in the future or want to better serve your ideal clients. The financial advice industry is constantly changing and innovating. Planners who work with savvy clients may need to transition service models to keep up with what their niche is looking for.
  3. You’re preparing to make a transition in your professional life that no longer meets your current service model. If you’re planning to retire, sell your firm, or merge with another firm, you’re about to undergo a major professional change. Auditing your current service model to make that transition more seamless can be helpful.

If this is you, you’re also doing the right thing for you and your company. Transitioning your business model to something new because it’s a better fit for your clients or your bottom line is tough, especially if you loved the way you used to do things, but it’s often necessary to continue growing and thriving.

More often than not, I see planners making the transition from investment-focused to comprehensive planning services or they’re transitioning from high-touch comprehensive planning to a more systematized version of the same comprehensive service model. The truth is that in today’s world of fintech companies and robo-advisers, financial planners still have an edge—they bring a human element to the conversation and can manage each piece of a client’s financial puzzle, whereas many tech companies cannot.

How to Reorganize

When planners come to me wanting to reorganize their service model, I recommend tackling the process in four phases:

  1. Pinpoint your current service offerings.
  2. Identify how your current service model impacts your firm’s capacity for growth.
  3. Build a course of action and address clients who will be transitioned to your new service model.
  4. Begin phasing out non-ideal clients who are no longer a fit.

Phase 1: Pinpoint your current service offerings. Start by pinpointing what, exactly, your firm currently offers to existing clients. It can be useful to go through each client on your books and document the services you provide, and at which rate. Usually, financial planners find that their existing clients fall into different tiers of service (think: bronze, silver, or gold) depending on the level of service provided and the fee they pay.

If you’ve been in business a while but have never outlined your current service offerings, you may find that you have clients that span a wide range of service levels and fees. Do your best to ballpark different service tiers and determine which of those clients would be ideal clients if you signed them today. This can help you segment clients into “ideal” and “non-ideal” for when you transition to a new service model.

Phase 2: Identify how your current service model impacts your firm’s capacity for growth. Once your clients are segmented and your current service model is clarified, identify if your firm can actually manage to service all these people based on the new service models that you came up with. Usually, whichever service model you’re transitioning to will require you to streamline your processes—and possibly walk away from clients who require a high-touch service but don’t fit your new service calendar or fee structure. That’s OK.

Your goal should not be to find a new service model that fits all of your current clients. Instead, focus on finding a service model that serves your best, most profitable, and most enjoyable clients. If it works for everyone, that’s just an added bonus.

Phase 3: Build a course of action. You aren’t going to transition service models in a day. Be patient with yourself and build a realistic course of action. With your new service model in mind, identify the clients who can and should be successfully transitioned to your new model. A few deciding factors might be:

Will they fit the new fee structure or are you pricing yourself out of what’s reasonable for them?

  • Do they need the services you plan to offer? For example, if you’ve worked with investment-only clients historically but now want to do comprehensive planning, they may not fit your new model.
  • Will a particular client enjoy and benefit from the new services you offer? This is slightly different than them needing services—you may find that many of your investment-only clients, for example, have been clamoring for other financial advice from you for some time and would be happy to transition to a new model that supports this.
  • Do you enjoy working with them? If you’ve had a client on your roster for a while and don’t enjoy seeing their name on your calendar for a meeting, it’s usually a good sign that they’re no longer a fit.

Once you’ve identified who should be transitioned to your new service model, you can build a course of action to communicate your new service model with them and start to implement. The steps in your transition process should include:

  • Communicating to your ideal existing clients what your new service model will be, as well as any fee changes. I recommend having meetings with clients to discuss and communicating via email to create a paper trail. The most important thing to convey in these conversations is how the new service model will positively impact them. You want to focus on the solutions and expertise you’ll be providing, not the service itself.
  • Gather any materials you may need to implement these new services, and update your website and your ADV. You’ll also need to streamline your new client journey and update all existing processes including your tech stack, client service calendar, daily operations, sales, onboarding, and review meetings. Working with an outside professional or agency can help you streamline this process.
  • Brief your team and train them on any service changes.
  • Adjust your budget accordingly if your new service model reflects a fee change that impacts your cash flow (for example: going from quarterly to monthly billing, etc.).
  • Have a “kick-off date” where the new service model will be implemented for clients. If it’s easier, you might consider a rolling implementation schedule over the course of one or two business quarters to get all clients transitioned without overwhelming your staff. This might mean changing meeting schedules, requesting new financial information from clients, or setting up workflows that send meeting agendas or task reminders.

Phase 4: Begin phasing out non-ideal clients who are no longer a fit. Don’t just cut off communication with clients whom you’ve determined are no longer a fit. It can be easy to slide past this phase in your process because you’re so excited to transition to your new service model. Instead, get intentional about creating a system to transition existing clients who don’t fit your new service model to a new planner, or creating a next steps plan.

This means you’ll need several referrals for them, and to have some sort of exit packet or summary that helps them organize all of their work with you to hand off to a new professional. You can easily hand off the client to another adviser who is a part of your team. Consider having an outside marketing consultant, copywriter, or business coach help you create the language around this transition. Just as you communicated solutions and impact to your clients who will be staying on, you should do the same for clients with whom you are “breaking up.” This transition, while difficult, is going to ultimately benefit them—and they need to know that. 

Topic
Practice Management