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You have undoubtedly heard stories about brokers changing firms who experienced everything from a minor disruption in revenue to an all-out career catastrophe. While you cannot anticipate every event, there is one thing you can do: Plan your work, and work your plan. Problems will still pop up, but they will have less of an effect on your move if you have a stable foundation from which to work.
Plan, plan, plan
Many brokers start thinking about and outlining a year or two before they actually make their move. While evaluating your options, be sure to solidify your client relationships. High client retention rates start long before you make a decision to change firms.
However, make sure you do not communicate anything regarding your plans to your clients or co- workers ahead of your move. If your current firm learns of your potential move, it could result in immediate termination and make it difficult for you to transition clients.
Business and organizational planning
If you are moving to another firm, you will be plugging into an existing infrastructure, with a built-in service model, culture and organizational structure. Presumably, it will also have materials and support available to help you – and your book of business – assimilate quickly into the firm.
But, if you are establishing an independent advisory firm, your work is cut out for you. You must find office space, purchase equipment, have a website designed, establish a competitive business model, develop a business plan with cost and earnings projections, create a vision for your business and so on. As an independent organization, you also need to configure industry relationships prior to announcing your change.
Regardless of the direction you choose, establish an organization structure that makes functions and responsibilities for serving clients clear. You should be able to scale it up into more specialized and skilled roles, then into departments if you want to eventually run a large firm. Even so, you will need to update your organizational design frequently as your business changes.
Fees and paperwork
FINRA, state, Investment Adviser Registration Depository and other registration fees will all need to be paid for by your new organization. Since the fees are not prorated, consider timing your departure to avoid paying annual fees at the new firm shortly before the end of the calendar year.
Other paperwork to manage includes:
- Dealing with licensing issues;
- Researching the product menu that will be available to you;
- Planning which current client assets will map to which products;
- Familiarizing yourself with the new technology and systems you will be using;
- Ordering new business cards and marketing materials;
- Creating client agreements and transfer forms; and
- Drafting your resignation letter.
Prioritize your client list
Once you have given notice to your old firm, the client retention clock starts ticking. You need to take action quickly. Create a spreadsheet and sort each client into one of four categories: clients you know will stay with you, those likely to stay with you, those you are uncertain of and those you do not wish to continue doing business with. Additionally, evaluate each clients’ assets to ascertain how much can be transitioned easily.
Develop a strategy for the order in which you will call your clients; save the sure movers for last, as you know they are your clients for good. Create, polish and practice an elevator pitch before calling your clients. In it, explain why you moved, and why they should come with you.
Asset movement
At this point, you should have already reviewed the products or product lines you are currently using that may not readily move to the new firm. Some products, such as annuities, may not be transferable. Also, consider the tax implications for clients transferring assets to ensure there are no April 15th surprises.
Familiarize yourself with the systems and support at the new firm. This is where the transition team at the new firm should offer assistance. Obtain their advice on creating and delivering new paperwork or online forms to clients. If going independent, you need to establish relationships with clearinghouses and other firms to handle your transactions. Here, the key is to learn the processes before your clients begin asking you questions about it.
The actual transfer of securities between broker-dealers is made simple through the National Securities Clearing Corporation (NSCC) Automated Customer Account Transfer Service (ACATS) process. Cash, stocks and bonds are typically straightforward transfers. Assets that may not be movable include: annuities or insurance products (particularly with surrender charges), those sold exclusively by the old firm, funds not available at the new firm and private placement investments in limited partnerships.
Tips for a smooth exit
If your transition is governed by the Protocol, remember you may only take client names, addresses, phone numbers, email addresses and account titles with you. You are essentially limited to a simple spreadsheet that you either take or send to your personal email.
Even if your actions prior to resignation are not governed by the Protocol, be prudent about accessing client information, downloading files, making photocopies of information, or retaining files or information on personal computers or mobile devices. Each of those can set off red flags with compliance regulators. Think carefully and obtain legal counsel prior to approaching and soliciting co-workers to leave the firm with you.
When the time comes to leave, your firm may react strongly based on the size of your client base and how you handle your resignation. Plan ahead in order to leave professionally. Despite any misgivings you may have about the firm, maintain amiable relationships with co-workers there; they may end up working with you down the road.
Trent Gain is the chief operating officer of The Independent Grid , a turn-key, advisor-centric platform that provides back office operational, marketing and compliance solutions to financial advisors who desire a true, independent platform. Follow Trent on Twitter at @theindgrid.
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