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"Successfully Navigating the Client Transition Conundrum"

September 10, 2021

Article by Phil Karter on "Successfully Navigating the Client Transition Conundrum"

The Legal Intelligencer

Reprinted with permission from the September 10, 2021, edition of The Legal Intelligencer © 2021 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.

Successfully Navigating the Client Transition Conundrum

By Phil Karter

Paul McCartney is purported to have written the melody to "When I'm Sixty-Four" around the tender age of 14. Sir Paul, course, has long since passed the milestone memorialized in that song, and for an increasing percentage of the legal profession’s baby boomer generation, it is also passing by in the rearview mirror.

By the same token, what may have been traditional notions of retirement age a generation ago no longer apply with the same degree of uniformity, as an increasing number of lawyers maintain vigorous practices throughout their 60s and into their 70s or even beyond, working in law firms that impose no mandatory retirement age. But regardless of whether firms mandate retirement or not, they all share a common concern, which is how to ensure the preservation and eventual transition of client relationships to the next generation. 

Formal written transition plans, though far more common in law large firms (often incorporating mandatory retirement policies), are still less common than one might expect in a profession whose members are often prized and well-compensated for strategic thinking and planning on behalf of their clients. But it behooves even those firms without such formal plans to consider at least the following four critical questions:

Are The Clients The Firm Is Hoping To Transition Really Clients Of The Lawyer, Or Clients Of The Firm?

Here is presented the age-old question of whether clients hire law firms or lawyers? Certainly, the answer greatly depends on the breadth and depth of the lawyer’s relationship with the client. For example, clients whose needs require the services of lawyers practicing in a variety of disciplines may be more reluctant to leave with a departing partner than those for whom that partner’s singular oversight of their affairs is irreplaceable. The solution in some cases is that the work simply stays with the lawyer who is handling a particular aspect of the client’s business.

For retiring partners, on the other hand, successful transition of the client relationship may depend on how much of the groundwork has been laid to ensure the client is comfortable with that transition. Hopefully, the client’s relationship with the lawyer or lawyers intending to take over the relationship already has been firmly established, and the retiring partner has helped facilitate that relationship by assuring the client that the firm will not skip a beat in providing the same quality of services even as he or she scales back or retires. In the best case, the increasing assignment of responsibility to the retiring lawyer’s designated successor(s) has been underway for a while, with full transparency to the client. There is, after all, no better way for a retiring partner to repay the loyalty to those who have contributed to their success, and to the firm in which they have practiced, than to enthusiastically support and facilitate the transition.

Does The Partner Want To Retire Or, If Not, Will They Take Their Business To Another Firm?

Many partners reaching traditional retirement age enjoy what they do and want to continue to practice for as long as they feel they can provide valuable services to their clients. Of course, there are other motivations that may factor into the equation as well, such as the partner’s financial goals or needs, or a lack of outside interests or retirement plans. But for even those older partners being eased by a firm toward retirement, the ability to move their practice to another firm may depend on the portability of the partner’s client portfolio, unless they have a particularized skill that is in demand and not fee-generation dependent. 

Many firms too are loathe to alienate their senior rainmakers, especially if both sides have not reached a joint understanding about how and when to transition business. This is why an increasing number of firms with traditional mandatory retirement policies have started to formalize exceptions to the rule in “special cases.” 

Does The Firm Risk The Loss Of Valued Younger Lawyers If The Partners For Whom They Work Take Their Practices Elsewhere?

The potential loss of promising younger talent when a partner leaves a law firm is always a concern, although sometimes the firm has little leverage when the practice area in which the younger lawyer works is highly, or even exclusively, dependent on the departing partner or practice group. Still, firms that do not provide ongoing and regular feedback to younger lawyers about how their careers are progressing and what are their prospects for partnership are missing an important opportunity to let them know how much they are valued.

Of course, there should be no sense of entitlement on the part of a younger lawyer to be gift-wrapped a senior lawyer’s practice. It should be the byproduct of hard work of impeccable quality that has helped support and grow their mentor’s practice, along with the assumption of an increasing share of responsibility conferred on them for managing the client engagement and furthering the client relationship.

Does The Firm Have A Compensation Structure In Place To Incentivize Senior Lawyers To Transition Their Client Relationships, And Junior Lawyers To Stay Long Enough To Reap The Financial Benefits?

Above, we speak of the importance of institutionalizing good communication practices with younger lawyers the firm is cultivating to lead it into the next generation.  But admittedly, even good communication and encouragement will not always prevent a younger lawyer from leaving if they feel that their opportunity for advancement within the firm is hindered by the continuing presence of the senior lawyer. When such situations arise, they can be very delicate for the firm to handle without ruffling feathers along the way. Consequently, the firm’s system of compensation is necessarily a part of the transition process. Those that encourage mentoring, delegating, and ultimately transitioning work by providing financial incentives to the older partner, while showing their commitment to the younger lawyer in a similar way, are likely to have a head start.

In summary, borrowing once more from the lyrics sung by the estimable Mr. McCartney, successfully navigating the client transition conundrum may indeed be a “Long and Winding Road.” But firms and baby boomer partners looking to achieve this worthwhile goal should always be guided by the mantra, “We Can Work It Out.” 

Phil Karter is managing shareholder of the Philadelphia Office of Chamberlain Hrdlicka specializing in tax controversy and litigation. He is a former trial attorney with the Department of Justice Tax Division. He may be reached at pkarter@chamberlainlaw.com.