Advisors planning to change their affiliation—be it a transition between broker-dealers, breaking away for a wirehouse or moving between RIAs—will have their work cut out for them.
Advisors need to dedicate a significant amount of energy prior to making the move, says Brian Bristow, Senior Vice President, Wealth Management at JIFFY.ai, an autonomous enterprise platform serving the Wealth Management industry.
Making sure data moves easily from one firm to another during a transition is a major hang-up.
Top Tips as shared by Brian include:
1. Segment Your Book
The first step to preparing to transition firms is to segment your book of business. This can be done along any number of lines, but it typically is done according to a client’s investible assets. So, a client with $1 million or more might be an ‘A’ client, and a client with less than $100,000 might be a ‘D’ client.
2. Clean Up Your Data
Make sure you have current data, current name, phone number, email address, other contact information in general, and information about beneficiaries. Think about how long it’s been since you’ve done a review of your client’s metrics, how well you know your client information and so forth.
3. Figure Out the Costs
Transitioning is expensive and disruptive to your business. It’s important to quantify the cost and do a cost analysis of making a move. Then build a model budget around that. That’s the foundation of your business plan. Have a budget, segmented clients, and cleaned-up data.
4. Cut the Chaff
Since clients are segmented anyway, now is the time to consider ‘firing’ certain clients. For various reasons, most advisors end up with clients who aren’t compatible with their business plan or who are just not profitable. Not every client has to make the transition with the advisor.
5. Due Diligence Time
A lot of due diligence is necessary for transitioning advisors, but they should first look at their current situation, Bristow says.
Figure out what your employment agreement says—do you have a non-compete clause or a non-solicit agreement? What are the rules of that agreement if you choose to leave?
Most people can review their contracts and agreements themselves, but sometimes an attorney’s help is necessary. Regardless, an advisor needs to be able to understand any agreements before making a move.
Due Diligence on the Receiving Firm
Scheduling a technology demonstration with any potential receiving firm is one of the first steps in performing due diligence of that firm. Before making the transition, advisors need to understand how the receiving firm uses technology to create a better experience for the advisor and client alike.
One of the variables would be what kind of transition support do they offer. What is their transition process? How do they support the repapering process? Is there any monetary relief for what will be a serious disruption in your business? What is the cost of the transition?
If they do provide money, review to make sure there are no conflicts of interest. That’s the nice way of saying ‘is it right ethically speaking?’ Are they asking you to do anything questionable? Do that sniff test.
Friendly Vs. Unfriendly
Hopefully, the due diligence will give the advisor an idea of whether the transition will be friendly, where clients, information and assets can move between firms with no friction created by the former firm, which in turn could make it an unfriendly move.
You need to know whether you are going out in a friendly fashion or not. In fact, you need to prepare for an unfriendly experience, which could be completely different.
Consider Product Mix
After the initial stages of due diligence, an advisor needs to understand the receiving firm’s product mix. Can client assets be transferred easily, or do accounts use products that are not on the receiving firm’s approved list?
Advisors should ask for existing mutual funds to be added to the receiving firm’s approved list to avoid having to sell out of a client’s positions, says Bristow, because the consequences of not doing so could cause unnecessary expenses to the client.
Reach out to clients as early as possible and share with them as much information as possible. Your clients are going to have questions, so have a communication strategy ready. Have your value proposition ready; have an elevator pitch phone call where you tell them why you are moving and have it clearly articulated and scripted. Be prepared for every client. Know which clients you want to bring over, who you are going to call, and how you’re going to communicate with each of them.
In short, as an advisor, if you are contemplating a move, plan ahead!