Each year, about 9,500 investment professionals leave their broker-dealer relationship for another. This means that about 9,500 financial advisers pick up their book of business with hopes of making a smooth transition to a new firm. Although advisers typically spend a significant amount of time exploring what a new firm can do for them, they seldom spend sufficient time exploring the dedicated resources that the potential new firm has for moving their book of business efficiently.
Transitioning your book of business to a new firm is a daunting task. It is laborious, detailed and painfully time-consuming, putting a great deal of pressure on adviser and staff alike.
NO MAGIC WAND
Unfortunately, there is no magic wand for making a transition run smoothly, especially in an environment where rules surrounding block transfers have changed. What most advisers find out as they go through the process is how much they don't know.
According to a study by Pershing Advisor Solutions LLC and FA Insight LLC, the average adviser tenure with a broker-dealer is 6.4 years, so by the time they move again, they face changes in the regulatory environment and the ever-increasing complexity of the process. The good thing is that there are many ways to minimize the impact.
An important key to a smooth transition lies in having a well-organized, experienced transition team that makes appropriate inquiries about the adviser's business and coordinates a thoughtful plan, while anticipating minute details that most advisers overlook.
There is no simple way to move from one broker-dealer to another.
Regardless, accounts are transferred in one of four ways:
Your new broker-dealer does the paperwork for you. Although it is no longer a common option, as privacy policies have changed — resulting in regulatory troubles for some firms that handle nonpublic client information — if your new firm is comfortable with your firm's privacy policy, they may handle the paperwork for you.
The broker-dealer that you are leaving sends a negative-consent letter and does a block transfer for direct business. If your old broker-dealer agrees to send out a negative-consent letter on your behalf, then they may do a block transfer for those clients who don't respond after 30 days. Given that the process can take as long as six to eight weeks and that brokerage accounts still will need to be manually transferred, some advisers prefer to handle paperwork themselves. Additionally, few firms are willing to do block transfers. Those that do typically charge per letter.
You prepare the paperwork yourself. Transferring advisers can compile a client information spread-sheet, merge the information with client forms, print and send to clients. Although this option may seem cumbersome, it gives the adviser control over timing and minimizes costs, while complying with most broker-dealers' privacy policies.
Outsource. Advisers may hire a third-party vendor to prepare and mail paperwork, and coordinate the transferring of accounts. Typically, these services charge $5 to $9 per packet of client information.
Advisers who are considering a move need to evaluate the new firm's processes, and interview transition teams to assess competence and expertise. They should also talk with advisers who recently have moved about the team's accessibility, and follow through. A solid transition team should be able to provide you with a detailed plan that maps out a four- to six-week timeline, detailing what you should be doing at every step.
Once you feel comfortable with your new firm, there are several steps that you can take to make your clients comfortable with your transition. For example, some advisers send DVDs to those clients who they aren't able to reach personally, to walk them through the decision and the process. Another idea is to time a client appreciation event with your move so that you may personally thank them for moving with you while giving them a forum to ask questions and sign paperwork.
Finding a broker-dealer that has the business model and support systems in place to serve your business is only Step One in the due-diligence process. Step Two is investigating the firm's transition team to assess their process of moving your book.
Having the support of a team that understands and treats the process as an art form is essential to moving your practice as seamlessly as possible.
Jodie Papike (jodie@cross-search .com) is executive vice president of Cross-Search, a third-party, independent-broker-dealer adviser and executive placement firm.
