Going independent? Already selected your new venue? Then you’ve already made some very big decisions about making a change and the kind of change you want. But now the nitty-gritty work begins that will determine just how successful you are at building your new business. Where will your office be? What kind of technology do you need? When can you contact your clients and what can you say to them? How and when do you change your registration? What do you do first?
“No matter how you slice it, it’s a lot of work. It is daunting,” says Andrew Daniels, managing principal, field development, Commonwealth Financial Network in Waltham, Mass.
Fortunately, there are plenty of experts who can help to shepherd financial advisors from traditional brokerage settings to the independent world. To help you develop a fail-safe checklist, Research magazine picked the brains of experienced transition guides and spoke with advisors who recently moved to the independent channel. Some of the items on the to-do list will vary depending on the form of your new business—whether you become a registered investment advisor or a hybrid advisor working with a broker-dealer.
Everyone we spoke with agrees the readiness is all: “It’s all about planning,” says Daniel Bernstein, director of research and development at Market Counsel in Englewood, N.J. “Have a written out plan of action.” That way, when the inevitable bump in the road suddenly appears, you’ll be ready.
What Your Peers Are Reading
1. Set a Timeline
When preparing to make a transition you may sometimes feel as if you have two jobs—running your daily business plus preparing for the next step in your career. You’ll need to prioritize what you need to get done and when. Develop your timeline with the key people who are helping you with your transition. If you’re planning on becoming an RIA, that would probably mean a consultant who can walk you through basic set-up issues, including selecting a custodian for your assets, filing new papers with the right regulator, legal support, and office setup. If you’re transferring to an independent broker-dealer offering a suite of turnkey solutions or joining a pre-established RIA, you’ll still need legal advice. Finally, and perhaps most important: Develop a brand with a message. On average, assume the process will take about four to six months, says Jim Guy, chief marketing officer of Cambridge Investment Research, in Fairfield, Iowa.
You should also leave plenty of wiggle room in the timeline. That way you can accelerate the process in case something goes wrong, says Market Counsel’s Bernstein. For example, your current employer may change a policy that would hurt your business.
Or perhaps word of your plans may leak; then the firm may quietly prepare to divvy up your accounts, or, worse, you could get fired.
If you have a timeline in hand, you know everything that needs to get done—you just need to make it happen much faster.
2. Get Your Legal Ps and Qs Right
The most basic rules on how to change firms are quite clear, thanks to the Protocol for Broker Recruiting, an agreement launched eight years ago and now boasting more than 600 industry participants.
The protocol governs the dos and don’ts of changing firms, from defining what brokers can and can’t say to clients during the process and what you must supply to the employer you are leaving. The protocol, however, doesn’t address every issue that may arise, especially for advisors working under contracts and with outstanding loans. Jim Eccleston of Eccleston Law Offices in Chicago says you need an expert to go over your current contract as well as the contract with the new firm. “The old firm may give you problems now, but the new firm may give problems later.”
Chris Wilmerding of Westwood, Mass., who recently left a wirehouse for Commonwealth, says you need to interview prospective lawyers carefully. The first lawyer he spoke with told him: “You have to be incredibly careful. We just don’t really know what will happen.” Wrong, says Wilmerding, who now manages an investment advisory practice under the name Thayer Partners. Savvy lawyers do have a good handle on how the process will work and you’ll spot them by questions they ask about your clients, investments, how important your accounts are to the branch, and whom you report to.