Passing the baton: succession planning in private client

I speak regularly with managing partners, heads of private client and individual private client partners regarding succession planning. In fact, almost half of the senior projects I work on have an element of succession planning involved.

The high-end private client work tends to be partner led and therefore it is critical for the firm to get its succession planning right. This needs to involve carrying out the recruitment at the right time, with the right level of seniority, with the right level of technical ability and, most importantly, the right personality – finding someone who is going to get on with the exiting partner and his or her client base.

Healthy appetite

When do you start planning for succession? An interesting question and one that is often influenced by the appetite of exit from the retiring partner.

I know of circumstances where a firm has recruited a partner specifically to come in and work closely with a retiring partner. The plan was to hand across key work and client contacts over a period of time. However, the exiting senior partner was not ready to retire. He held on to his work and contacts, leaving very little for the new partner to do.

The new partner was faced with a difficult decision: sit and wait for the handover to commence (which would have eventually led to putting himself in a difficult ‘spotlight’ position with his new firm), or go out and build his own successful client base.

In this case, he rightly chose the latter. However, when the senior partner was ready to hand over his client base, the new partner was too busy to take on his work.

This left very little time for the management of the firm to start planning for his exit and the pressure was on the firm to find a quick solution. As we all know, finding a good private client partner quickly is not easy, so this particular firm was left exposed.

A lesson to be learnt from this scenario is to make sure that the exit strategy and succession plan is agreed ?by everyone involved, including the exiting partner.

Most of my clients would like someone in place five years before the retirement actually takes place. The person joining often has a dual role, where it is part succession planning ?and part building or bringing his or her own business.

These are the easiest private client partners to find in the market, as most partners work on a combination of their own personal clients and firm clients so, when it comes to exiting, most partners will not bring a full client following, but will bring their own clients/part following. Making a move where they are going to work on succession and inherit some new work and clients assists with the whole process and helps everyone involved – firm and individual.

A number of my clients have partly addressed succession internally but will also recruit someone externally to come into the business. Rarely do I come across roles/opportunities where it is ?a 100 per cent succession planning role with a 100 per cent business to inherit. ?I feel that my clients like to make sure that all partners they recruit into the business have the ability to business-build and a part client following demonstrates this ability.

Sensitive issues

What is the right level of seniority? Unfortunately, because we live in a world in which common sense does not always prevail, and we are not allowed to talk about people’s ages when considering them for jobs in the market, the sensitivity of discussing succession planning always amuses me.

In meetings with the management of my clients, I often get very confident managing partners nervously start getting on to the topic of ages. Often they are trying to replace someone in their mid 60s, and are looking for a long-term solution, which means that they wish to avoid recruiting someone who is 58 and who is likely to give them the same planning problem in two years time. However, they try to cover their requirement, in terms so tactful they can’t actually say what we all really want to say, which drives me and any sane businessperson absolutely mad.

In reality, my clients want someone who is senior enough to come in to the business as a partner, but also someone who can give a decent length of service to some of the world’s wealthiest families. As I mentioned earlier, the exiting partners have often advised these families for over 20 years. Surely, today’s law firm deserves to be allowed to offer its clients stability and continuity of the lawyer/client relationship?

With this in mind, and common sense prevailing, the partners I recruit for succession planning tend to be 35 to 45 years old (however, if someone was to approach me for a succession planning role in his or her 50s and would like to be considered as they see themselves working into their 70s or even 80s, I would be very happy to consider them).

It is very important to find the right calibre of lawyer for my clients, especially when it comes to succession planning and handling the firm’s/exiting partner’s long-standing clients. As well as technical ability (which for someone joining as a partner is an absolute must-have), it is also important to get the right personality that is going to work well with the exiting partner.

I often find that there are almost two levels of succession planning: first, where someone joins who is in his or her 30s, where there is a longer handover planned; or second, someone who is in their 40s where the handover is a lot shorter and requires less time actually working together on the handover.

Looking back on the succession planning deals that I have worked on, most of the partners that I have placed have been in their late 30s and the senior exiting partners have enjoyed working closely with them for a number of years, to give the best possible handover, ultimately keeping a high client retention for the firm.

The success of making these succession roles work is ultimately down to finding the right personalities to work with the exiting/senior partners.

If the chemistry is there between the exiting partner and the new, younger partner coming through, then more often than not, this positive professional relationship rubs off with the clients. Also, by recruiting someone in their 30s and having a slightly larger gap between the exiting partner and the new partner, compared to recruiting a mid to late ?40s partner, it can often help on ?winning over the next generation of your client’s family.

Specialist solutions

Succession planning is an interesting time for firms and requires long-term planning. Firms need to speak with recruiters who understand the private client market and the partners operating in this space.

With regards to the general market, I am always pleased to specialise in private client. My leading London clients talk heavily about the Far East business, including mainland China. I also have clients keeping a close eye on India. My Middle East team occasionally comes across private client requirements; however, this market seems to be served by other jurisdictions (partners who travel over to the region).

The London market has held up well and I am currently working on a number of partner-led projects involving succession planning. Outside of London, I have a number of clients looking to recruit, but there is a real need of client-following to justify partner-level entry.

I have had one or two clients speak with me about alternative business structures (ABS). My general feeling is that unless you have a volume business which is investable, high-end private client/family office businesses are difficult to raise investment, as legal advisory at this top end requires partner-led advice/relationships and there are questions surrounding how scalable these relationship businesses are.

I know of volume businesses that are being formed, but this does not really have any effect on my high-end private client firms/businesses. A number of my clients with turnover of between £10m and £50m per annum are looking to grow and grow quickly because of the change in the UK legal market. I work closely with these clients, assisting them on merger discussions, often between firms who value the need to provide private client advice.

Richard Park is the managing director of Charles Park Search & Selection www.charlesparksearch.com/