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:

  1. Name
  2. Address
  3. Phone Number
  4. Email Address
  5. 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. 

No. 6: Winging it

If you have to move in a day, a good broker-dealer can accommodate that and you will survive. With that said if you have the time, be sure to take advantage of it. The No. 1 mistake I see reps make in this regard is not stopping and considering for a moment how things will actually look to their clients; particularly if you are going independent for the first time. Don’t wing it with a cell phone and file room if you can avoid it. Clients want to see that you are a good business person. 

No. 7: Thinking a late-December move is a good idea

Yes, you can move in late December as long as it’s not too late in December.  Remember, FINRA closes typically for the last two weeks of the year—advisors and firms forget this fact. It’s not just FINRA that closes—put yourself in your clients’ shoes. Do you really think their priority over the holidays will be to sign and deliver back their paperwork to you?  Ask any advisor that made the late-December move how many times they heard “call me back after the first of the year.” 

No. 8: Not fully understanding the financial terms of your deal

There is more to life than a good payout and a big upfront check. Sometimes, that upfront check is a curse. Pay attention to the small print in that loan document. If you have a loan, is it forgivable, repayable, or a combination of both? When will the monies be paid? Are there parameters that need to be met for payment? What are the terms of forgiveness? How many years are you locked up? Are you locked up or free to go as long as you repay the money or have met the forgiveness criteria? They can go on and on.

No. 9: Assuming your clients are actually your clients

In the past five years, privacy issues and adhering to them have become paramount.  Look at your current firm’s privacy policy. Does it clearly state “If your financial advisor leaves, you will allow him/her to take your information to the new firm unless you opt out”? If so, you’re in luck—your broker-dealer recognizes that your clients are indeed your clients, and you are able to take them with you should they choose to follow you to your new broker-dealer. This does not mean the broker protocol is out the window; this means that if you do it the proper way, your clients are yours for the taking. 

If, however, your current firm’s privacy policy is silent on your ability to take client information, or your employment agreement reads something like “Firm so-and-so considers our client and customer relationships valuable assets and you agree that for 12 months following termination you will not solicit or attempt to solicit away from us any of those clients whose names were known to you through your employment with us,” then your firm believes your clients are actually their clients and you need to tread carefully. 

No. 10: Not holding out for the right fit

If quality of life is just as important to you as making a load of money, hitching with a firm that is more concerned with their bottom-line and adding you as another number in their proprietary distribution chain is probably not a great idea. Before you know it, once you are stabilized on the new platform, you will be made to fit into their box, working with the products they want you to and doing business their way; not your way. You know what is best for your clients, and as an advisor you care about your clients and you want a firm that will care just as much about you. Your gut-check will tell you this.