What is an advisor’s duty of care when selling their business?

When selling a business, it’s natural to focus on one thing: getting the best exit possible. Traditional business owners may have the freedom to prioritize price alone, but for financial advisors, it’s not so simple. After building a career around putting clients’ interests first, any exit strategy must reflect that same approach.

The concept of fiduciary duty doesn’t exist in Canada in the same way it does in the U.S., but that doesn’t mean advisors should simply sell to the highest bidder at the expense of their clients. Advisors still have a duty of care, which means making sure their clients are looked after today and throughout the sale.

In any sale, there are three stakeholders to consider: your clients, your staff and you — the one who built this business. That order matters. Recognizing your interests in this process is important, but clients still come first.

That’s easier said than done though. What do you do if the buyer, who may even be the highest bidder, plans to put your clients in their proprietary funds, going against the culture or vision carefully cultivated throughout your career? And how do you respond if the new buyer only cares about your book, putting the people you’ve come to see as family out of work?

If the answers to any of those questions don’t sit right with you — and you take your duty of care seriously — then you owe it to yourself and your clients to walk away. That doesn’t mean settling for less than you want from your business; it means choosing the offer that best aligns with your goals. Even if it’s not the highest bid.

Most advisors agree. A recent Investment Planning Counsel survey on succession planning found that 79% of advisors said maintaining client trust and relationships was a very important consideration in creating a succession plan. Almost half (46%) said the same about maximizing total payout.

A successful sale only happens when everyone wins —clients, staff and advisors. If there is an imbalance, the deal will sour.

Continuity is king

Your responsibility is to do what’s right for your clients. When you’re offering advice, you’re making sure every recommendation and action serves them well. It’s up to you to continue that level of care when selling the business. If done right, the transition for clients should be less about switching advisors and more about having a new voice deliver the same plan.

Of course, continuity isn’t something that happens overnight, it’s a process that begins long before the sale. Early on, it’s important to have honest discussions with clients and staff about your desire to eventually retire. Explain your wish to establish repeatable processes and transition them to a new team that delivers the same service.

But don’t just talk — listen. Earn their trust by hearing out any questions or concerns they have so their views can be reflected in your plan. Understand what they want out of a new relationship.

To maintain that trust after the handover, the new advisor will need to share their own story, about who they are, how they work and what clients can expect from them. The way to do that is through discovery meetings, where your clients and the new advisor can get to know one another. Your job is to help the new advisor understand how you work with your clients, what processes are in place and what can be tweaked.

Duty of care is primarily a client-centric concept, but you’ll want to think about the same issues in terms of staff. Not only will your staff continue the relationships you’ve developed over the years, but you also want them to stay on after the sale to maintain service levels.

Make sure your employees are talking to the new advisor or firm and asking similar questions — how does the advisor like working with staff? How can your people improve their processes? What do they need for a successful outcome?

One of the biggest mistakes you and a new advisor can make is focusing on products. Imagine you and your successor are meeting with your client, and the new advisor says they want to overhaul the portfolio you’ve created. That implies you didn’t act in their best interest, and it frames the relationship around products rather than advice.

That’s not a foundation for trust. Instead, centre conversations with the new advisor on getting to know the client and building a strong relationship focused on goals. Investment changes may be needed later, but only after the new person gets to know your clients.

Be aligned with the buyer

When it comes time to sell and choose a buyer, your duty of care should be at the forefront of the plan. Consider selecting a buyer who shares your approach and dedication. That means going beyond assessing their investment or back-office capabilities. Consider how they manage clients, communicate and build relationships.

Advisors often talk to their clients about the legacy they want to leave. This exit could define yours. Did you put your clients first? Did you ensure your staff was supported? Did you balance those priorities with fair value for yourself?

In the end, the right succession plan isn’t just about maximizing dollars, it’s about preserving trust and making sure clients are set up for success.