You are currently viewing Avoid the transfer-out train
william87/123RF

Avoid the transfer-out train

Safeguard your business by knowing your client’s PoA and executor

Do you have a relationship with, or even know, your client’s power of attorney for property? Do you know who your client named as executor in their will? Have you asked your client for an introduction to their attorney and executor?

If you answered no to these questions, the assets you administer on behalf of your client are at risk of being transferred out as soon as the attorney for property or executor gains control of your client’s assets.

The one thing the pandemic taught us is to be prepared. It is essential that everyone, regardless of age, has a power of attorney for property, at minimum. Further, given current Canadian demographics, your book of business likely includes clients who are near, or in, retirement and have already selected their attorneys for property and estate executors. These representatives will decide which assets remain with which advisor and firm.

We are under the preconceived notion that performance should be the critical aspect reviewed in such decisions. Advisors may think: “If I have done well for the client and met their financial objectives, I should retain the business even after the client hands the administration of their financial affairs to the attorney or executor.”

Unfortunately, this is not always the case. When your client passes control to the selected attorney, or when the client dies and the executor begins to administer the estate, the attorney or executor will compile a list of your client’s assets, including those held with you and your dealer.

More than likely that attorney or executor has a relationship with another advisor and firm that they’re more familiar and comfortable with. If they’ve never met you or dealt with you and your organization, what is the likelihood the assets will remain with you, even if the returns and systems you offer are superior?

Unless specified in the power of attorney for property document or the will, the attorney or executor has control and discretion to select service providers (financial advisors, lawyers, accountants, realtors, insurance professionals, etc.).

Your past performance can take a backseat, and the advantage may go to those advisors with whom the attorney or executor has worked in the past. The attorney or executor knows, trusts and is comfortable with their own advisor and that advisor’s business, including:

  • form of contact and communication
  • service hours and website functionality
  • asset information and reporting
  • manner of conducting business (fees and service arrangements)
  • financial software systems

I’ve seen many instances when the client’s firm had superior processes, but the attorney or executor automatically transferred the assets to their own advisor merely due to their unfamiliarity and unwillingness to learn how to use the superior systems. They never mentioned performance or investment advice.

A challenge to retaining your book of business may similarly arise if your clients contemplate choosing a corporate attorney or executor, especially if the attorney or executor is a financial institution with its own dealer. At the onset of the administration (unless constrained by a power of attorney for property or a will), the corporate attorney or executor will likely send the existing advisor a transfer form to move the assets to their institution.

These scenarios are the fuel for the transfer-out train, because the advisor didn’t engage in discussions with their clients, asking who their attorney and executor are, and arranging for introductions. An introduction is key to help bridge the transition and build a relationship with the attorney and executor. This will also benefit the client, as they can assess and query the attorney’s or executor’s process of transferring out the assets. Consequently, the client can specify directions to keep the assets with the existing advisor, if they choose.

To protect your book of business, speak with your clients about their choices and take the time to meet their attorneys and executors. Familiarize the attorney and executor with your approach to client service, reporting capabilities, website functionality and ability to assist them with their communication and administration objectives.

Clients and their executors and attorneys need to know the benefits of keeping the assets with you and your organization, giving them the opportunity to rethink their plan to transfer the assets out.

Michael Kulbak, MBA, CPA, CMA, TEP, is principal of Kulbak Trust Solutions in Mississauga, Ont.

Source: Investment Executive