Moving to another firm or breaking away to form an independent RIA is stressful by nature. This type of life transition ranks right up there with buying a home, getting married, or having your first child. It’s more than a change of employers. It’s a life altering event.

What makes this so impactful is how it affects not just your path going forward but that of your clients as well. You’re not moving alone. Clients move with you—or don’t in some cases. Before making a change like that, it’s important to review financial advisor protocol to ensure your following best practices. Here’s what financial advisors on the move need to know.

At Bridgemark Strategies, we are leading financial advisor recruiters and consultants serving Financial Advisors, RIAs, and Broker/Dealers nationwide. Contact us today to schedule a consultation.

Advisor Protocol May Prohibit Taking Clients with You

The original “broker protocol” was an agreement signed by Smith Barney, UBS, and Merrill Lynch in August of 2004. It was later signed by other banks, and the framework has been adopted by most advisory firms as an “ethical exit strategy.”

Prior to the broker protocol, advisors could announce their separation from a firm on Friday afternoon and spend the weekend calling all their clients to make the move with them. The financial advisor protocol prevents that now and may even limit any contact you’re allowed to have with clients.

This is the first item to research before making any moves. Contacting clients ahead of time to announce your intentions is a definite no-no. That can result in legal action from your current firm, especially if it’s a bank, which technically “owns” your client relationships.

Taking client information from your current employer could also be an SEC violation. Regulation S-P, implemented in 2003, outlines some strict guidelines and penalties regarding client privacy. If the data is owned by the firm, you may be subject to this rule.

Contact Information is Allowed by Advisor Protocol

Your client relationships may be technically “owned” by the bank or advisory firm you’re employed by, but you’ve been working to maintain them. Therefore, under advisor protocol, you’re allowed to take the following with you when you leave:

  • Name
  • Address
  • Phone Number
  • Email
  • Account Titles

Note that this list does not include account information, balances, performance, history, or personally identifiable information such as social security or EIN numbers. Those all fall under SEC privacy guidelines and cannot be transferred without specific client consent.

Don’t give in to the temptation to speak with a few “trusted” clients when you’re preparing to make a move.  It may seem like a good idea at the time, particularly with your most high-end clients, but it is almost always a bad idea.

The Legitimacy of Employer Non-Competes and Written Agreements

Consult with an attorney if you signed a non-compete or other employer agreement that prohibits you from bringing your clients to a new firm with you. Some of these forms may have language about soliciting new clients also, which should be reviewed carefully.  An attorney will also provide guidance as to how the broker protocol may be impacted by any agreements you have signed. In some cases, broker protocol can trump agreements. In other cases, agreements can trump broker protocol.

With the advisor talent pool shrinking significantly in recent years, firms are now more likely to enforce broker protocol is followed or make it more difficult to move on. On a positive note, firms looking to recruit are also more likely to offer a better compensation package for you to join them.

Violating Advisor Protocol Could be Detrimental

From the humble beginnings of just three signers, the broker/advisor protocol now has nearly 1,500 signers. Morgan Stanley, which was originally Smith Barney, broke away in 2017, but most of the other Wall Street banks (except UBS) and many Registered Investment Advisors have embraced it.

If you’re moving to a new firm, check to see if they are signers of the broker protocol. The protocol after all is an agreement between firms and applies when an advisor goes from one that is a part of the protocol to another that is a signer and part of the protocol.

Get Professional Help with Financial Advisor Transitions

Bridgemark Strategies has experience with advisor transitions and can help you make the choices that are right for you. Contact our firm today for assistance.