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Industry Spotlight > Broker Dealers

Who 'Owns' the Client?

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Last week, I raised the issue of junior advisors leaving their firm and taking some of the clients with whom they work. Because this situation is widespread (and possibly more the norm than the exception) I suggested that in the best interests of the clients, the independent advisory profession should establish guidelines for how such a transition should be made, in an orderly and responsible fashion.

I received a number of responses, but only one–Morris Armstrong–had the temerity to post his. Because he nicely captured what I believe is a widely held position on the subject, and because the issue itself warrants far more serious treatment than it’s received in the profession to date, I’d like to explore what Morris had to say in more detail.

He wrote: “Your use of the phrase “in the client’s best interest” rates up there with Mom and Apple Pie… … Thievery shouldn’t be condoned because it is in the client’s best interest; it’s clearly in the best interest of the departing advisor.”

That’s a fair criticism if high-sounding terms are left vague. But in the this case, the “client’s best interest” seems clear: A client (or group of clients) wants to continue working with their advisor as they have done for years, and they expect their ex-firm to ensure a seamless transition of records so that their level of service remains high. Is this any different from expecting your former doctor to send your file to a new physician?

And “thievery” is an interesting, if pejorative, word. Certainly, the firm didn’t own the clients, so Morris must be talking about the client files. Yet to refuse to transfer the client files after the clients have left would be vindictive at best. As for protecting the former firm, retaining electronic copies of those files is virtually automatic. The best solution would be for industry standards that included the presumption that clients are free to decide whether to go or stay, communication by both parties giving them the option to choose, and guidelines for the orderly, liability-free transfer of client data. Anything less would be a disservice to the clients and the profession.


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