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Changing Firms? Make Sure You Aware Of These 4 Hurdles


Changing Firms? Make Sure You Aware Of These 4 Hurdles

Changing firms is a major undertaking—however it’s often the lack of transparency surrounding what’s actually involved in making a move that can make it seem more overwhelming for advisors.

Over the past several years, movement among advisors has risen to record levels and as a result, most firms have the onboarding and transition process down to a science. That said, a change in employment for a financial advisor is unlike a career move in any other industry—there’s no 2-week notice given to your employer and no exit interview to be had. After months of performing due diligence on a prospective firm, understanding the nuances of what’s actually involved in a move prior to jumping ship is critical and will ensure a smooth and successful transition for both you and your clients.

Just as your clients trust you to be as thorough as possible when it comes to their financial well-being, there are a myriad of details that must be reviewed and followed once you’ve decided to change jerseys. Here are four things you need to be ready for/aware of:

1. The Broker Protocol

Since 2004, the Protocol has served those advisors leaving for greener pastures particularly well. Intended to ensure that clients’ interests were protected, the Protocol defines just what advisors can and can’t take with them in terms of client information. While temporary restraining orders are largely a thing of the past, advisors who disregard the guidelines of Protocol will likely find themselves in court incurring costly legal fees and with a transition that will most certainly be derailed.

2. Attorney

Once you’ve committed to making a move, it’s imperative that you retain an attorney who specializes in advisor transition, as there are rules and regulations specific to the brokerage business that only a specialist will be familiar with. Your attorney should review both existing and new employment contracts, and guide you through the terms of the Protocol prior to departure day. While most prospective firms will require that you speak with their internal counsel, keep in mind that by retaining your own attorney you’ll have someone working as your personal advocate as well.

3, Contracts, Memo of Understanding and Transition Packages

After months of vetting a firm’s platform and resources to ensure that you can serve your clients in the best way possible, you’re ready to sign on the dotted line. However, as a fiduciary of your current firm – and according to the terms outlined in the Protocol – actual contracts requiring your signature may not be available until just before you move. A sample contract outlining the details of a transition package, including the terms of the forgivable loan, should be obtained for review by both you and your attorney. As for those details that have been individually negotiated, you should request a Memo of Understanding as an addendum to your contract.

4. Talking to Clients:

Advisors who choose to move do so because they have reached the proverbial “tipping point” in terms of their ability to service clients and grow their businesses. After months of due diligence to ensure that a move will benefit your clients, you must be able to clearly articulate the upside as far as “what’s in it” for them.

For example, will you have greater freedom and control as far as products and fees? Will there be less bureaucracy to deal with, which in turn will allow you to devote more time to your clients’ needs? Whatever the benefits are, you have a short window of opportunity to reach out to clients after having made a move and it’s imperative that your positioning statement and value proposition be solid. Many clients may ask why nothing was said to them about your intentions prior to a move: Keep in mind that per the Protocol, advisors are restricted from soliciting clients or sharing any details about a new firm prior to a move. However, many advisors opt to have very general, rather benign conversations with clients to assure client loyalty once they know a move is in on the horizon. A qualified attorney can guide you on what you can and can’t say.

Change can be invigorating, however not knowing what it takes to get to the other side can understandably lead to some trepidation. Advisors who have strong relationships with their clients and transition their business for all of the right reasons will likely find that clients are more loyal to them than to their previous firm. Be thoughtful with your due diligence and well prepared, and when the time comes to jump ship, you may wonder why you didn’t do so sooner.

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