Are you planning on making a change? Whether you’re changing broker-dealers, starting or joining an RIA, or looking for M&A opportunities, it’s important to plan your transition carefully. To help, review these financial advisor transition tips from Bridgemark Strategies.

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.

Three Important Considerations

Keep these financial advisor transition tips top of mind:

  • A successful financial advisor transition begins with careful planning. Moving to a new firm or going independent cannot be accomplished overnight. For best results, it’s recommended that you start planning for the transition process up to six months prior to making a move.
  • Do not attempt to do this alone, especially if you’re doing it for the first time. Finding expert representation is a good first step. Assemble a team that includes an attorney, accounting professional, and transition specialists who have experience with advisors in transition.
  • Once your team is in place, limit communications about the transition to your inner circle. Loose lips sink ships. There are legal and custody issues that could derail any deal you have in place with a new firm. Address those first before contacting your clients.

Wrapping Up Loose Ends

Client transition might be top of mind, but it’s not your first priority. Advisors often have financial connections to their current firm that need to be severed before making a move. Money market accounts used for expenses are one example of this.

  • Have your attorney check your existing contract. The language in a registered representative agreement will have limits to what an advisor can and can’t do when making a transition. These restrictions typically prevent access to client information or forbid solicitation of clients.
  • Give proper notice. You’ll feel an urge to download client contact info and performance data before taking that step. Depending on your firm, you may not be able to do that. Compliance can also flag those activities, and you’ll find yourself in a legal battle.
  • When an advisor goes independent, the new custodian will transition cost basis data for your clients, which is all you really need. Past performance is nice to have, but it’s not worth the legal headaches if you have compliance issues when getting it. It’s best to just let it go.

Communicating with Your Clients

If you’ve planned properly and started the transition process well in advance of giving notice, you should have client contact info. You may even have been tempted to have a discreet conversation about your plans. That’s a bad idea. Avoid the following topics with your clients:

  • Thoughts or plans to make a move
  • A list of firms you’re considering
  • Whether the client will follow you

Conversation on any of these is an ethical violation and can trigger punitive measures from your current firm. You have a responsibility to faithfully represent your employer until you’ve actually severed all ties. Focus on the client relationship, not the transition.

Clients will naturally follow advisors they have strong ties with. There’s nothing you need to do to make that happen other than servicing clients properly. When you move, those folks will likely want to move with you. It’s a natural reaction, not a forced event.

The Protocol for Broker Recruiting (2004)

In 2004, an agreement was reached between broker dealers that a certain protocol would apply universally to all firms when advisors make a transition. In the beginning, most broker dealers were on board with it. In 2017, Morgan Stanley and UBS dropped out.

Other broker dealers, like Merrill Lynch, are still adhering to the protocol. It states that an advisor in transition can take the name, email, address, telephone number, and account type.

Check with your existing employer to see if they are a protocol firm. If so, transitioning clients will be simpler. If not, it’s not the end. You will have a different process to follow and should seek professional guidance.

Choosing the Right Custodian for an RIA

Moving to another broker dealer is one option. Transitioning to an RIA is something else entirely. You’re essentially starting your own business in the latter case, so there’s greater responsibility and more decisions to be made. One of them is your choice of custodian.

  • The custodial landscape has changed significantly in just the past few years. Schwab and TD Ameritrade have merged. E*TRADE sold to Morgan Stanley. Fidelity continues to roll out new technology and fight for market share from Schwab, while Pershing is getting more aggressive. Also, smaller firms such as Apex have expanded their offerings. There’s a lot to evaluate. Take your time.
  • Focus on technology. Check the reporting systems, client engagement portals, and any analytics and rebalancing options. Each custodian offers different options in these areas.
  • Data transitions. Another question to ask is how data will be transitioned. You’ll need to repaper accounts. Make tech a priority in your custodial choice.
  • Other considerations. The fees and support structures can also be a major differentiators. How are you supported? What are your charges and/or charges for your clients?

Get Professional Help with Financial Advisor Transitions

What we’ve covered in this article is a general outline of the advisor transition process. There’s more to it, of course. You may run into unforeseen obstacles, and the landscape changes quickly in this industry. Having someone with experience in your corner can make the process smoother and less stressful for you.

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.