The continuity of their financial journey and the responsibility of guiding them is a very key element to our customers' (financial to say the least) future. Every solo financial practitioner would one day have to bequeath his clients to someone. That answers Why should you do it!
When would that be? A planned transition is of course if everything goes well, and you want to retire from the practice and take up something, most likely more intense self actualization activities later in your life… An unplanned one could happen any day!
What would continuity mean? Your customers continue to experience an uninterrupted journey. For sake of a simple comparison - the car continues to run towards its destination despite a change in the driver.
Who would that be? Any random person your clients would stumble upon in future? Or would it be someone who thinks very much like you (nobody can replace you…but yet) with whom you have already engaged in an organized manner to ensure such continuity?
How would you do continuity planning? You would have to address both the unplanned and the planned departure while answering this question. For the unplanned, you have to get yourself a contingency planning practitioner. For the planned departure, you have many options that come up - sell your practice with a deferred exit of your involvement in the practice over a few years from the deal date; you could merge your practice with someone else's and plan when to lay down your boots; you could corporatize your practice and hand it over to professional management, yet continue to be a shareholder… the choices are many.
Where would you find such a situation? Well, I have three examples and would cover it in three parts for the sake of deeper understanding of the situations and how solo practitioners who have a key man risk can still work their way through this difficult planning challenge.
Let me share with you one amongst the real life scenarios that triggered the question of continuity. It is an unfortunate situation to describe. (Name, location and other personal details have been deliberately withheld as the intention is to provide you with lessons learnt from such experiences).
An IFA, a lady, with almost a decade of practice was diagnosed with critical illness. It meant that she would be unable to move around and meet clients. Most of her work therefore had to be over phone and emails with her clients. What her clients were used to was her frequent visits to their residence or their office and of course, signing mutual fund and insurance application forms and cheques for payments based on the discussions.
The young lady was very disturbed with the news and clearly knew that her days are now numbered. One of my colleagues happened to interact with her and she was clear in articulating that her clients had to be serviced online. That was her first decision. The implementation was a concerted effort. Emails were written to clients updating them of the health condition. Calls were made to key relationships of the lady IFA. Assets (read mutual fund AUM of clients) were transferred from the individual ARN to the platform ARN. Almost all clients were onboarded online. Everyone allotted a user name and password. All suggestions for purchasing / redeeming / switching - be it lumpsum or systematic, was initiated by the young but ailing lady from her home. The clients merely had to approve them or call her back in case they wanted any changes. Payments were all moved to payment gateway linked transactions. For those who didn't want to user internet banking, ECS mandates were set up with the flexibility of using them both for one time purchases and or for systematic investments. (Please note, now we have a more efficient NACH system to implement this). Commissions were paid by the AMC to the platform on all the assets that were transferred. It was in turn paid to the lady IFA by the platform. This continued for almost 9-10 months.
A learning we take from this is, continuing service to clients is top of the mind for the IFA. She treated it as a must do action item. And ensuring that it gets done became our joint responsibility.
Towards the 10th month, the illness had the better of her. During this time, the clients had off and on, while enquiring about her health, asked her if some family member was helping her yet? A very supportive spouse that she had, he decided to leave his job in a private company and take up the licenses for insurance agency and mutual fund distribution. Unfortunately, the medical emergencies didn't provide a convenient atmosphere for him to focus on exams and get prepared. He left his job, but ended up spending a lot of time attending to his beloved.
Our learning here was that when situation turns worse, even when we are aware of the impending result, a plan for succession within the family also meets with its own emotional challenges.
Unfortunately, we lost her soon after. Of course, the clients were intimated. However, given that the assets were under the platform ARN, we continued to safe harbor the client until the spouse cleared his NISM exam. Soon as it was done, we informed all the clients about the transition. For the clients, their experience of interacting with status of their investments didn't change. The logins remained the same, the portfolios continued the way it was planned. The only change that took place was - when they clicked on contact my advisor, they found the name and phone number of the spouse and not of the lady who had been serving them for long.
There were a few clients whose transfer of assets had got delayed. For only these assets, the spouse had to interact with multiple AMCs, give the death certificate, nomination declarations for evidence and the new ARN he had acquired for movement of these assets. The majority of the assets being on the platform, there was no need to interact with 15 different fund houses and go through the hassle time and again.
Our learnings here were manifold - one, we realized how cumbersome it is to transition across so many AMCs when death occurs. Processes weren't standardized. Declarations were different. Certain documents were to be franked and some had to be notarized. We could see that when assets are consolidated with one provider, the administrative ease was far superior. We could also ensure that the customers didn't move on in search of someone to help them. They had the confidence that their financial journey continued uninterrupted. Consider the income to the IFA's family - because we had the nominations in place, the platform continued to pay the nominee. Once the nominee became an ARN holder, we didn't have to go to any AMC for change of broker - it was all within the platform. There was no complication of whether trail will be paid or not.
Many a time, we look at platforms as transaction portals! Such experiences bring an awareness in the market that platforms are beyond transactions!
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