A few years ago, I spoke with an advisor who had recently joined another broker-dealer. Prior to making his move, he had checked with the prospective broker-dealer to be sure the mutual funds he was using were on his new firm’s platform, and indeed they were.
But there was one problem — the funds weren’t approved for use in the Broker as Portfolio Manager program that he had worked with for years. It appeared that his new firm had simply made “an honest mistake,” but it was one that made it very difficult for him to service his clients properly without upending his business.
To prevent such a mishap, follow a three-step “trust, but verify” process:
1. Talk with home office product specialists. Advisors should schedule in-depth conversations with home office product specialists in key product areas. It’s helpful to take detailed notes, especially if interviewing at more than one firm.
For example, if an advisor uses outside managers, it’s important to verify not just that the managers are on the prospective firm’s platform, but that they also are available in the exact investment programs the advisor uses.
For example, if an advisor requires a particular mutual fund or SMA in the Broker as Portfolio Manager program, it’s important to verify that the fund is available in that program. Offerings in the UMA and mutual fund wrap programs should be evaluated separately.
Advisors should also obtain details on how products and platform fees are structured, so they can determine how much they’d likely charge clients at the prospective firm and how much they’d probably net.