Stringam Law: Canadian Succession Planning Insights Urge Proactive Action

• Kurt Schlachter of Stringam Law notes that despite awareness, effective succession planning remains marginal in Canadian law firms, often delayed by busy schedules and psychological barriers.
• A major failing is neglecting client relationships until a partner's retirement is imminent, underscoring the need for early client involvement in transition discussions.
• Stringam Law integrates successor lawyers gradually into key client relationships to ensure continuity and comfort during a Canadian law firm partner exit.
• Formal law firm governance partnership agreements are crucial, with the Law Society of Ontario now requiring written client contingency plans in annual filings for private practice lawyers.
• Proactive planning, including clear governance and client transition strategies, is essential for mitigating risks and ensuring firm stability and compliance.

Clients, he emphasizes, must be actively included in the conversation about impending transitions, and this dialogue needs to commence well in advance of any public exit announcement.

Despite widespread discussion surrounding succession planning within small and medium-sized law firms, tangible improvements across the industry have been minimal, according to Kurt Schlachter, Chief Executive Officer of Stringam Law. Schlachter, who is slated to address this critical topic at the Canadian Legal Summit in Toronto this October, observes a general awareness of the issue but a notable lack of sufficient strategic action. He attributes this delay to both structural and psychological factors, often likening it to personal estate planning—a task easily postponed due to a perceived abundance of time.

Senior partners frequently find it challenging to objectively plan the winding down of their professional practice, given how deeply their identity is intertwined with their work. This reluctance is not unique to the legal sector; data from the Chartered Professional Accountants of Canada indicates that only one in ten Canadian business owners has a formal succession plan in place. This broader trend underscores the systemic difficulty in addressing long-term transitions proactively, leaving many firms vulnerable to abrupt changes.

A significant oversight identified by Kurt Schlachter Stringam Law is the tendency for firms to neglect client relationships until a partner's retirement is already in motion. While strategies like equity structuring, standardized exit policies, and developing successors are valuable, they do not inherently guarantee client retention when a trusted lawyer departs. Clients, he emphasizes, must be actively included in the conversation about impending transitions, and this dialogue needs to commence well in advance of any public exit announcement.

Stringam Law has implemented a deliberate approach to client retention succession planning law firm-wide, focusing on identifying successor lawyers who demonstrate genuine investment in the firm's future and are not considered flight risks. These chosen individuals are then gradually integrated into key client relationships, fostering familiarity and trust over time. This methodical process ensures that by the time a Canadian law firm partner exit occurs, clients have already established comfort with their new legal counsel, a far more effective strategy than managing a rushed, cold handoff over a mere three-month period.

The specific strategies for client transition also vary significantly depending on the practice area. For instance, business law hinges on maintaining specific, long-standing client connections. In contrast, family law prioritizes preserving the firm's overall reputation for competence among a constantly evolving client base. Real estate practices, however, depend heavily on sustaining the confidence of crucial referral sources. Stringam Law, which operates across Western Canada, has standardized exit policies for partner transitions, yet the application of these policies still requires careful judgment tailored to the individuals involved, the particular practice, and the geographical context.

Structural deficiencies often become apparent long before succession planning is even considered. Kurt Schlachter recounts his astonishment upon discovering a reputable, decent-sized regional firm operating without a formal partnership agreement in place. He advises any two-lawyer partnership to establish foundational structures immediately, covering aspects like compensation, authority distribution, and clear procedures for partner exits, mirroring the advice they would offer a business client forming a partnership.

Stringam Law itself has maintained formal governance throughout its significant growth, expanding from approximately 20 individuals when Schlachter joined the partnership to approximately 111 employees today, a trajectory detailed in his 2024 Canadian Lawyer profile on Stringam's strategic expansion. Upon assuming the CEO role in 2023, one of his key priorities was to address a structural gap by introducing a tiered partnership model, as the firm previously offered only full equity partnership without an intermediate stage.

Further underscoring the importance of proactive planning, the Law Society of Ontario now mandates that lawyers in private practice include written client contingency plans in their annual filings. This regulatory requirement reinforces the non-negotiable nature of early preparation, ensuring that firms have clear strategies for client care in the event of unforeseen circumstances or planned partner departures, thereby enhancing compliance and client protection.

The insights from Stringam Law Canadian succession planning highlight a critical need for Canadian law firms to move beyond mere awareness and implement robust, forward-thinking strategies. The failure to address succession planning comprehensively can lead to significant disruptions, including client attrition and internal disputes. Proactive measures, such as establishing clear law firm governance partnership agreement structures and developing detailed client transition protocols, are essential for maintaining stability and growth.

Ultimately, the ability of a firm to navigate partner transitions smoothly, ensure client continuity, and comply with evolving regulatory demands like the Law Society of Ontario contingency plans, directly impacts its long-term viability and reputation. Kurt Schlachter's observations underscore that while the process can be challenging, the benefits of early, deliberate planning far outweigh the risks associated with procrastination, safeguarding both the firm's future and its client relationships.

Partners and compliance officers in Canadian law firms should proactively review their succession plans, ensuring formal partnership agreements are in place and client transition strategies are developed early to mitigate risks and comply with regulatory mandates like the LSO's client contingency plan requirement.

Source: Original reporting via Canadian Lawyer Magazine