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April 25, 2011 at 01:02 PM
If you are a financial advisor, you have no doubt at least tinkered with the prospect of changing broker-dealers. Whether you are thinking about taking the plunge headlong into independence for the first time, or becoming a member of the ever-growing second generation of independents there are certain pitfalls that you can avoid in order to avoid a major “fail.”
In most cases, once you set your transition in motion, it will happen; but will it happen in the best way possible? The broker-dealer you are leaving and the broker-dealer you are choosing to join play a major factor in the success of your transition and thus your livelihood and business.
No. 1: Lack of an experienced sales assistant
Whether you are a first-timer or second-generation, an experienced sales assistant is critical to success. While most firms don’t require an advisor to have a sales assistant, their benefit is overwhelming. Imagine setting up an office, managing a client marketing campaign, making phone calls and visits to your clients, learning a new system and trying to show the face of calm and security to your clients. It won’t happen without an experienced SA.
No. 2: Thinking broker protocol is a gray area
Your broker-dealer’s privacy policy governs what client information you can or cannot take with you (more about this in No. 9 below). If both the old and the new firms are members of the broker protocol, be grateful that you now have a gift that enables you to leave in the “proper” way and be left alone by your previous firm. While you won’t be able to take your entire client files, the broker protocol does allow you to take five pieces of client information with you when you leave:
- Name
- Address
- Phone Number
- Email Address
- Account Title
Having this information will help make your transition easier. While you won’t have all the personal data you had on the client previously, you at least have a way to contact the client and re-build your data files. Do not do or take anything else with you. Do not try to get around this.
No. 3: Not hiring an attorney
Non-competes, non-solicits, outstanding loans, performance clauses, restricted stock—the list goes on and on. Ask the firm you are joining if they provide a knowledgeable attorney on your behalf to guide you through the proper and best way to conduct your transition. The attorney should be familiar with the firm you are leaving and their contracts. Of course, if you are leaving or joining a firm that is not a part of broker protocol, this becomes critically important. One false move when it comes to maneuvering through any of these common contractual issues can cost you a ridiculous amount of time and money.
No. 4: Not communicating often enough with your new broker-dealer
The time period leading up to your transition is a critical time. Make sure the firm you are considering has a clear, detailed transition timeline, and recommended guidelines for leaving your specific firm under your specific circumstances. In fact, they should be able to provide you with a set of tailored “Do’s and Don’ts” for your particular situation. A dedicated transition team is a plus and should include weekly or even bi-weekly transition calls to get you ready for your big day.
No. 5: Not having realistic expectations
As much as I’d love to tell you that you won’t lose a client, the hard fact is that you probably will. A silver lining is that this is a great opportunity to divest yourself of those clients who may not make sense for you anymore—I am a firm believer in less is more. Choose your clients wisely and you will be able to serve them better, make more money and protect yourself from frivolous claims.
