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Think You Can Take Client Data With You? Think Again

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When an advisor is meeting with prospective or current clients or delivering clients their periodic statements, it’s common for said advisor to discuss the returns the advisor’s investment portfolios have delivered over time. The longer the time period, the better the picture of performance.

But for advisors moving from one brokerage firm to another, or from a wirehouse or independent broker-dealer firm to another BD or RIA firm, there’s a problem with that common scenario, according to John Mackowiak of Advyzon.

While a “breakaway broker” can take along some client information with them under the Protocol for Broker Recruiting, most can’t take along that historical performance data and plug it into a new portfolio management system at their new firm unless they first clear with their former employer that they can take that data with them to their new gig.

Under the Broker Protocol, advisors who move from one brokerage firm to another have the right to take along clients, though there are caveats to that sweeping statement. First, you need to make sure that both the firm you’re leaving and the firm you’re joining are members of the Protocol.

When leaving a Protocol member firm, advisors can take some basic client information with them, as the FAQ of the Protocol directory lists: “the name, address, phone number, email address, and account title for every client that you personally serviced at the firm, subject to certain limitations …. You are not permitted to take any other documents or information concerning the accounts of your clients.”

There have been some high-profile departures from the Protocol since the fourth quarter of 2017 — notably Morgan Stanley, UBS and Citigroup. However, there are still 1,760 Protocol member firms as of May 2018, according to the Protocol’s registry. While the original Protocol covered wirehouse firms, it has grown to include many independent broker-dealers; there are also hundreds of investment advisory firms that are members.

A recent Fidelity poll found there was heightened concerns among advisors about how those high-profile departures are affecting advisors’ ability to switch firms successfully, whether they’re moving from one brokerage firm to another or going to an independent BD or forming or joining an RIA firm.

‘An Unpleasant Surprise’

Mackowiak says it comes as an unpleasant surprise to many breakaway brokers and other advisors in motion that they can’t take with them client performance data, unless they seek permission and receive from their old firm the right to take a specific kind of data with them.

Those advisors, he says, usually feel that “I can see all my data, all my transactions, and can bring it with me when I go.” But unless they’ve saved the “custodial source data,” Mackowiak warns that Advyzon or any other portfolio management system won’t be able to load portfolio performance data from inception into their system.

However, he says that if the advisors save the source data, having first “cleared it with the broker-dealer,” they can port the performance data since inception over to the new system.

Mackowiak jokes that failing to have the since-inception performance data can be “great if that inception performance starts in 2009; your performance since inception would be huge!” But the serious issue is that lacking that data “can be very misleading” to the client looking at her own portfolio’s performance or a prospect looking at an advisor’s model portfolio performance since inception.

Mackowiak is chief business development officer at Advyzon, the software company founded in 2014 that provides an “all in one” client performance reporting, billing, document management and CRM platform for 325 mostly RIA clients, though he says, “we have a few pure broker-dealers on the platform.” Mackowiak notes that Advyzon is itself a “breakaway” firm, with the great majority of its executives, including himself, having moved from Morningstar, where Mackowiak spent 12 years selling Morningstar Office to advisors and consulting with them on their use of that platform.

Regarding the surprise many breakaway brokers express when they realize they can’t take portfolio performance data with them, Mackowiak says he “compares saving those source data files to buying insurance” for an advisor’s new practice.

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