It goes without saying that most business owners will face the difficult decision of letting team members go at some point during their career. Whatever the reason may be, it’s best to have a plan in place that is compliant from both an HR and regulatory perspective. Documentation is a must throughout the lifecycle of the termination process — I cannot stress this enough. Do not leave any loops open before, during or after the termination occurs.
Avoid headaches: Do this first
Every business owner, including independent financial advisors, will have to follow different steps based on their state and compliance requirements. Before you even think of terminating a member of your team, you must make two very important phone calls in this exact order.
The first call you will make is to your employment attorney. Even if the last time you had to let someone go was only three or four years ago and you’re thinking to yourself, “Easy-peasy, I’ve done this before,” — stop! It is quite possible that the requirements to keep your business safe and guarded have changed since the last time you let someone go.
Always call your employment attorney well before things get heated and tempers flare. Your attorney will be able to help you to understand what your rights are based on, the circumstances, and how to proactively take the necessary steps to safeguard your business.
The second phone call that you need to make — way before uttering the words “I’m going to have to let you go” — is to your compliance team. Whether you have an in-house team or you’re required to call your broker-dealer, do not forget this step. You’ll need to understand the paperwork requirements for the process to run smoothly.
Is the person that you intend to let go licensed or non-licensed? Did they have access to the broker-dealer or custodian’s portal? How quickly can their access be shut off?
The circumstances and the “why” surrounding the termination will be an important guide for how your attorney and compliance team will help you facilitate a smooth process that keeps your clients and your business safeguarded.
It’s your business: Protect it
Letting a person go is never easy. Whether he or she was the nicest person but not right for the role, or whether the relationship was tumultuous and rife with ego-led behaviors, the moment of firing someone can be bittersweet. You may feel a sense of relief or the complete opposite emotion of anxiety because of the situation or what may come next — and you may feel vulnerable.
However, remember those two phone calls to your attorney and compliance team? You are well on your way to being adequately prepared for this moment. Your business is protected, because you are following their guidance completely.
So, what happens once you’ve informed the person that they need to pack up and leave the building? It is standard procedure that their access is immediately cut off. Hopefully you have a good relationship with a reliable and responsive IT company to shut off access internally at that moment. You will also need to decide who, on your team, will receive emails in lieu of that person so that messages from clients or important business contacts continue to come through. Decide with your tech company how to structure the overflow until everyone has been informed of the person’s departure.
You’ll also want to collect passwords to the terminated individual’s computer to ensure that data is not lost and that you can still pull it from their device. However, do not let them log in to their computer. You or a member of your team should do so, to keep the data safe. If the former employee has any company property, request that they hand it in right away.
If the terminated person has used company email on a personal device, your attorney may recommend that you physically watch the person delete all company email or apps related to the business from their phone. Don’t just take their word for it if they say that they deleted everything; you will want to see it. Remember, the purpose of following a set of procedures is to safeguard your business!
The dismissed individual will likely have personal items on or near their desk and perhaps in other parts of the office. You or a senior member of your team should monitor this person while they collect their personal items and until they leave the office completely. Don’t take any chances. It is your responsibility to ensure the safety of client matters and the team. Although you have been preparing for this moment, it is often a complete shock to the person you terminating. You can never predict how they will react.
Protecting team morale
If you manage a team or if the only other person left is you, it’s important to “digest” what happened and why. You did not make a rash decision when deciding to terminate this person but, as we all know, it can be emotionally challenging even if you follow the best plan without any hitches.
Consider pulling your team together to address any questions they may have and alleviate any anxiety associated with this big change. As you all process the situation together, remember it is your role as the leader to motivate and inspire the team. The path is always forward, and nothing will get in the way of you continuing to build a fantastic firm with the right people alongside you.
It’s important to also discuss who will take over certain aspects of the person’s work. If the terminated individual was heavily involved with your clients, you should have a clear understanding of where their work stands for the folks that they serviced. Always assure and calm your clients and your team.
What’s next for clients?
Your attorney may or may not recommend that you inform your clients about the person’s departure. Depending on their guidance, which supersedes anything shared in this article, here are a couple of points to consider.
If clients had a significant relationship with the person who was terminated, they’ll ask why he or she is gone. Consider working with your attorney to understand what you should and shouldn’t say to keep your business protected. And touch base directly with these clients to tell them there will be no interruptions to the great service they’re accustomed to receiving.
If the person terminated was licensed, you must also factor in the possibility that he or she will try woo away your clients. Make sure your story is compliant and buttoned to reduce the possibility that your clients will consider moving their assets away from your firm. Even if the person was awful to work with, you don’t need to share that with your clients. Always remain professional, especially if you run your firm. Show that you course-corrected swiftly to continue to deliver the best service to your clients.
Finally, you should also have a script ready in case you receive a call in the future requesting a reference for the employee you terminated. This script should outline what pertinent information you should share, based on guidance you received from your employment attorney and compliance team. Know what your rights are, as the business owner and their former employer.
Meg Hanington is a cofounder of Beacon Partners, a consulting firm that helps mid-career independent financial advisors improve their financial planning and wealth management businesses.