Transitioning Clients is Easy -- If You Have a Plan

Source: Public Practice

In the second part of a two-part article (read part one here), Bill Reeb continues a discussion of client transitioning, providing guidelines to consider and a sample transition plan. Part one emphasized the importance of retiring partners transitioning their clients and the disincentives to doing so. Unless they're financially penalized for failing to transition clients, partners can effectively increase their retirement buyout because the firm compensates them after retirement for work they should have done before retirement.

Reeb recommends that in addition to a mandatory retirement date, partner/shareholder agreements that provide for early retirement benefits should condition those benefits on the partner giving at least two years' notice. Partners who fail to do so or fail to follow a client transition plan should be subject to severe financial penalties. This is important because firms need significant lead time to plan for someone's departure. The firm has to “find additional resources to manage the client relationships, perform the unique technical work, and actually put in the high-level raw work hours,” Reeb explains. The firm can always waive the penalties for a partner who fails to meet the notice requirement but who properly transitions his or her clients before leaving.

Reeb suggests that firms take the following steps in managing the client transition process:

• Create a transition plan for each retiring partner three years before his or her retirement date,
• Transition “A” level clients first,
• Assign a new partner or manager to take over each client relationship,
• Identify an action plan for each account, outlining details of the turnover process.

Transitioning clients is easy, Reeb says, but “there needs to be a plan, it needs to be clear what we expect the retiring partner to do, and if those action requests are ignored, there needs to be severe ramifications for that neglect.”

For the complete article, click here.

For a sample transition plan, click here.

From Public Practice, Texas Society of CPAs, August 2010, www.tscpa.org.