You Better Disclose Your Deal to Your Clients When You Move

They are going to find out about it anyway, and they're better off hearing about it from you
MAR 03, 2010
Though I’ve been doing this since 1984, when I had a lot more hair, it still amazes me when the Retail Brokerage World makes the mainstream press. For example, last week the Wall Street Journal reported about the retention bonuses given to Morgan Stanley Smith Barney reps. In fact, reporters from the trade publications have migrated over time to various media in order to bring their expertise and cover the “Wealth Management Industry.” We now regularly see Dow Jones and Reuters report when substantive Advisors move from one firm to another or when a Branch Manager or Regional Manager makes defects to a new shop. Back in August of last year, SEC Chairman Mary Schapiro “encouraged” the CEOs of the large broker-dealers to be “vigilant” in ensuring that incentives given to recruits do not put clients at risk. She writes: “Some types of enhanced compensation practices may lead registered representatives to believe that they must sell securities at a sufficiently high level to justify special arrangements that they have been given.” In other words, a struggling Advisor who got a big check feels obligated to give his new firm a return on their investment and perhaps will be more aggressive in pursuing transactions than before. Finally, when an Advisor leaves a firm, the Advisors Left Behind in the old office are calling the former colleagues’ clients and saying things like: “You know, Mary only left because she got a big check from XYZ. XYZ is not better for you; they just made Mary an offer she couldn’t refuse. Ask her about this when she calls you!” My point: If you are planning on making a move, or you’ve made one recently, you better be prepared to explain to your clients why the new firm is better for them than the old. In addition, you MUST tell them about the money you received in order to make the move. I believe this will be mandated soon anyway. In the meantime, you’re better off if they hear it from you, and not from your “friends” at your old shop, and not from reading about it online.

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