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5 important steps toward building a new broker-dealer relationship

By Bonnie Schab

So, youve finally decided that its time to trade in your old broker-dealer. Its a big decision and there will be a lot of details you will need to manage. Some financial professionals describe the process as concurrently getting divorced, remarried, and purchasing and moving into a new house. Especially in the beginning, switching broker-dealers can look like an overwhelming task. But there are a few measures you can take early on that will give you a successful start toward a smooth transition.

1. How do they look to me?

Perhaps there was an attraction at first sight, or it was a case where your interest grew over time until it eventually reached a point where you are now considering a commitment toward establishing a permanent relationship. Either way, its time to conduct a more critical analysis of your potential new partner. Beyond the initial attraction, you must seriously consider whether such a union is likely not only to survive, but also to develop and strengthen over time. You should feel chemistry and sense that the new broker-dealers culture will be compatible with your practice.

One of the most important considerations is your current business mix. This applies to both the demographics within your book of clients and the mix of products those clients are holding in their investment portfolios. If you work with a lot of older clients who are nearing the distribution phase of the retirement cycle, you will want to make sure your new broker-dealer has experience with these types of transactions. Likewise, if you have a lot of younger clients in the asset accumulation phase, ensure that your new broker-dealer offers a number of strong choices among those types of product lines. You also should carefully consider the type and amount of payout you will receive for the transactions that are most prevalent in your office.

List the advantages that you receive from being affiliated with a broker-dealer and then use that list as a checklist for evaluating your new one. Technology can be a major source of competitive advantage for your business, so you will want to know if your new broker-dealer will have the technology in place that will allow you to spend more time with your clients and less time on paperwork. Along the same lines, you should ask yourself whether they will have the training, tools and resources that will allow you to keep up to date. Lastly, you should try to envision the type of relationship you will likely have with your new broker-dealer. Having an interactive relationship should be high on your list. Talk to other representatives that have worked with this broker-dealer and ask how they rate on customer service. Nothing is more frustrating than constantly having to leave voice mails with your business partner.

2. How do I look to them?

This question could help you understand some of the motivation behind this potential partnership. Again, your product mix will be a major consideration. In this highly regulated environment, compliance is another important area you should examine. How will they perceive your registered representatives, on an individual basis as well as alongside their other clients? Check out the red flags chart for things that could make or break a potential deal.

3. Kicking the Tires

Assuming that you have conducted due diligence on your new broker-dealer through phone conversations with a recruiter, e-mail, marketing materials and Internet research, you might now feel that you have a good understanding of what this broker-dealer is all about. But making a decision at this point would be the equivalent of proposing marriage to someone with whom you developed a relationship with through e-mail, without ever meeting face to face. As the old saying goesseeing is believing. A home office visit is an excellent opportunity for you to put your gut to the test. Meet with senior management in person and ask a lot of questions. At most broker-dealers, the personality of the firm flows from the senior management team throughout the entire organization. Walk the floors at the broker-dealers offices to experience the culture firsthand. Try to get a sense of the pace at which employees are working and take note of both the expression on employees faces and the environment in which they work. Ask to see some of their processes and technology in action and, if permissible, jump on a desktop computer for a test drive. Your goal should be to walk away from your visit with a three-dimensional view of the firm.

4. Moving Day

Now that youve made your choicehopefully, a well-informed decisionits time to move your accounts from your old broker-dealer to their new home. For the first 90 days, youll want to ask for a dedicated point-person you can work with while making your transition. This will make you feel more comfortable and cut down on having to start every conversation with, “Im new to the firm.” In the beginning, the paperwork will remind you of closing on the purchase of a new house, but this is only a temporary inconvenience.

Specifically, youll want to find out what type of assistance they will offer to transfer your book of business (e.g., preparation of block transfer documents, preparation of client mailings, etc.) to avoid unnecessary time delays and accounts being left behind. Aside from your new broker-dealer planning your transition, it will be helpful for you to be aware of the following issues prior to moving day:

Will your current broker-dealer authorize a block transfer of your direct business?

Will your current broker-dealer continue to pay commissions after your termination date? If so, for how long? Will they include trail commissions?

Start the review and approval process of your business cards, letterhead and other marketing materials early.

Have a good understanding of the required paperwork to transfer your book of business, in particular those documents that require client signatures.

Remember that you will need to be re-appointed with the insurance companies and register again with the states.

5. Settling In

Next, youll need to start conducting business with your new broker-dealer. But theres a good chance your new broker-dealer may have different policies, practices and procedures than your old one. How can you level the learning curve? The most successful transitions are informed transitions. One way to get new reps up and running is by conducting orientation conference calls with key departments to provide them with an overview of the firms policies and procedures. Additionally, broker-dealers will provide new representatives with a training manual including detailed instructions on writing new business, placing trades, etc. Some broker-dealers also may offer comprehensive representative and support staff training at the home office providing new offices with the tools and resources they need to run their office more efficiently.

If you are in the market for a new broker-dealer, following these 5 steps should give you a solid foundation to begin building a long-lasting relationship.

Bonnie Schab is Senior Vice President, New Business Development, National Planning Corporation, Santa Monica, Calif. She can be reached via e-mail at [email protected].

Reproduced from National Underwriter Edition, July 29, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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