From Boomers to Zoomers: Transitioning clients for retirement

Editor: April Walker, CPA, CGMA

According to the Retirement Industry Trust Association (RITA), approximately 10,000 Baby Boomers turn 65 each day. Forty-seven percent of Baby Boomers have already retired. Almost 75% of the CPA workforce had reached retirement age in 2020. The number of Baby Boomers in the profession who are retiring is certainly set to increase in the next few years, with changing staffing models and rapidly changing technology and tax legislation.

Succession planning is difficult. Transitioning work to others is hard. But it can and must be done. This column provides insight into the pitfalls that can occur during the transition but also, more importantly, the opportunities and solutions to help alleviate some of the heartburn.

Retiring partner’s to-do list

A retiring partner has much to do before making a final curtain call. At the top of the list is determining the “who” and the “how”: Who will now be the client’s partner or team? How will this be communicated? How will the transition actually happen? This process involves several steps. The to-do list and selection process for a successor partner/staff may include the following:

Considerations for best fit for successor partner/staff

If possible, transitioning a client’s relationship to someone they are familiar with will help facilitate the change. It is even better if this can be done gradually. Consider also the client’s compatibility with the next generation and how the client likes to communicate. Matching up similar communication preferences will help ease the transition.

Think about what technical skills are needed. This includes considering specialty areas — a tax-exempt entity and a restaurant client would likely need different staff to handle their unique issues. Does the client need someone with an estate planning background? Does the client need financial statements or have other specialized needs such as business valuations? What is the client’s experience with technology? Consider also the personality type of the client as well as that of the potential successor.

Considering client termination

Should some clients be terminated upon the partner’s retirement? All partners, not just those who are retiring, have their favorite clients and may assume all their clients should be retained and transitioned. A partner’s exit is a good time for the firm to evaluate whether all the retiring partner’s clients still meet the firm’s ideal client profile. These clients might be better suited and better served elsewhere rather than being transitioned to the next generation in the office.

One other consideration may be whether the retiring partner’s retirement compensation is affected by culling clients. If the retiring partner’s compensation is based on a retained book of business, that partner might be reluctant to let any clients go.

Communication within the firm

Communicate internally the retirement or scaling back of a partner as soon as possible. Employees tend to listen to the grapevine and make assumptions. The current and succeeding leaders of the firm should be as clear and transparent as possible. Discuss the succession plans and where they stand. Consider how best to handle this communication, based on the firm’s culture — staff meetings, retreats, and/or one-on-one meetings with key personnel.

The retiring partner should also draft a memo on all substantial clients to share historical information and knowledge that might not be captured in their client files. This would entail personal matters that are important, such as the client’s family dynamics, issues faced during the time the client has been with the firm, the client’s length of time with the firm, etc. This process can be made more efficient by developing a template to capture this information.

The staff or partner taking over the client should spend time reviewing this client memo and the files from prior years. They also should look for ways to add value through planning and additional services that the retiring partner may not have thought to pursue or did not have the time to implement.

Communications with clients

Once the planning is complete, teams taking over the client accounts have been selected, and internal communication has been taken care of, it is time to officially let clients know about the pending retirement and introduce them to their new team. One of the pros of having a partner retire is the opportunity it gives the younger partners and staff to stretch their wings. It presents an opportunity like no other for staff members to grow their experience, expand their knowledge, and build their book of business.

Making those introductions — some tips

Ideally, for larger clients, this introduction should be done face to face and more than once before retirement. This requires planning well before the retiring partner’s final year. Begin including incoming staff in meetings with all major clients well before the retiring partner officially leaves, not just in the year of retirement.

For individual tax clients, tax season is a great time to make this first introduction, since this is when many clients are already in more frequent communication and likely already have meetings scheduled, whether in person or virtually. Make sure to include the administrative staff so they can help schedule the appointments.

Not all clients will need a meeting. A letter may be sufficient for informing clients who have had less contact with the retiring partner.

Communication announcing the retirement to clients should preferably come from the retiring partner. Clients may be disappointed to lose their relationship with the retiring partner, but they are also planning for retirement someday themselves and, hopefully, will be understanding.

The retiring partner should also communicate to the client any and all known changes to level-set expectations. For example, maybe the retiring partner would complete a return in a few days for one of their “favorite” clients, or maybe they would personally pick up client documents, etc. The client needs to be aware of all such changes that will happen after the transition. It may be easier for the client to hear this directly from the outgoing partner.

How long should the retiring partner stick around?

In an ideal world, the incoming partner or staff should be involved with the retiring partner’s key clients for the two to three years leading up to the retiring partner’s final year. The incoming partner or staff member should be involved in client meetings, become the main client contact, and begin managing the firm’s relationship with that client. The retiring partner can communicate to the client that they are scaling back over the next few years. This makes the transition more natural and seamless. This will not work if a retiring partner does not give sufficient advance notice or has a shorter retirement plan.

A one-year transition is somewhat abrupt. Some clients may need more time to feel comfortable with the incoming partner or staff. The authors would not recommend a shorter hand-off for any key clients. It would be best for the retiring partner to identify, well in advance of their actual retirement, which clients may need a longer transition period.

Problem-solving for likely issues

The following questions are likely to arise over the course of the transition:

How do you handle a client who keeps asking for the retiring partner? The retiring partner should clearly communicate the transition plan and then must stick to that plan. If a client calls asking for the retiring partner, they should not jump in immediately. Communication from the retiring partner should focus on the qualifications and competencies of the incoming partner or staff and convey the trust that has been placed in their hands. A longer transition usually helps with this issue.

Should a retiring partner be allowed to continue to work with a short list of longtime clients who may not respond to younger staff as favorably? It is probably not a good idea to allow this to continue with key clients because the transition to the new trusted adviser may never occur. Also, clients may talk to each other — how will this look if the retiring partner kept the relationship with client A but not client B?

How do you deal with a retiring partner (particularly a legacy partner) who will not stay out of the firm’s business? This can best be addressed in firm policies and best practices. Are retiring partners still part of key meetings? Who is running the meetings? Can retiring partners make any key decisions? If the succession planning process is working properly, retiring partners have time to mentor and coach the generations coming up behind them. There should be trust and confidence in those generations to let them make their own decisions with their new clients. The retiring partner should be there to guide, not direct them.

What should be done where a retiring partner may be getting pushed out earlier than planned, refuses to transition clients, or remains involved in the firm’s business? These issues should be addressed in the firm’s code of conduct and possibly also in the partner’s retirement agreement.

Time for retirement

There can be a great amount of hesitation and fear from the retiring partner about announcing they are stepping back and/or retiring. However, most will find that their clients are not only understanding of the fact that the retiring partner is stepping back, but they encourage it. From the authors’ personal experience, most of the time, the message from the client to the retiring partner is something along the lines of: “Congratulations. Your retirement is well deserved.” With proper planning and some upfront work by the retiring partner, the transition can be smooth and largely successful for all involved. The retiring partner can walk away knowing that clients will be taken care of and with a feeling of a job well done.

Contributors

J. Raleigh Cutrer, CPA/PFS/ABV, is a shareholder with Matthews, Cutrer and Lindsay PA in Ridgeland, Miss. Teela McCullar, CPA, is director, Barnard, Vogler & Co. in Reno, Nev. April Walker, CPA, CGMA, is lead manager–Tax Practice & Ethics, Public Accounting for AICPA & CIMA, together as the Association of International Certified Professional Accountants. Cutrer and McCullar are members, and Walker is staff liaison, of the AICPA Tax Practice Management Committee. For more information about this column, contact thetaxadviser@aicpa.org.