It's a familiar scenario. After months (and in some cases years) of contemplation, research and discussions, an adviser has finally decided to switch firms. The adviser is ready to engage with the prospective firms and their recruiters. Now what?
I tell advisers they should ask recruiters these six questions. Their answers will determine whether or not this firm will be the right long-term partner to help you grow your business and serve your clients.
1. Who owns the firm?
This the first question to ask to gain an understanding of where the firm's revenue comes from. Are there proprietary requirements? Will you be required to sell in-house products? If so, what are these products and what are the fees for your clients? Once you determine how the firm makes money and its overall objectivity, you will have a much better idea of what that will mean for you and your clients.
2. Who owns the book of business?
This one is fairly obvious, but critical nonetheless. What will happen to your clients and assets if there is a separation 10 years from now? What does succession look like at the firm?
3. Who does the firm use as a clearing firm/custodian?
For advisers who are going independent or changing firms within the independent channel, you want to determine if you prefer staying on the same custodian/clearing platform or switching to a different one. If staying with your clearing firm is a deal-breaker know this going in. Let's face it; if you don't need to change your clearing firm, your transition will be much easier.
4. How portable are your assets?
It's important to know the kind of support the firm can provide in the specific areas where you do business. Ask about the portability of your assets in relation to the companies you work with. This is relevant for alternative investments and separately managed accounts (SMAs) in particular as it's likely firms won't use the same fund managers as you are currently.
5. What do the payout structures look like?
You clearly want to ask about payouts for commissionable products versus the advisory side of the business. For the advisory side, ask about the manager and administrative fees the firm charges and get a general picture of how it all prices out. What are the rep fees? Request a copy of expenses, payouts and operational charges for client accounts.
6. What kind of transition support will you have?
Most broker-dealers and many RIAs have dedicated, experienced transition teams in place to support advisers during a transition. Although the transition team is there to help walk you through the process so you can focus on your clients, ask about the specifics. How much support will they provide in terms of all of the required paperwork? Will they help locate office space and set up necessities such as phone and Internet? Will a representative of the transition team visit your office to assist with the transition, if needed?
Bottom line: Most advisers only want to move once (or once more, depending on their history).
