Transition is tough. Nobody leaves a broker/dealer (BD) they’re happy with. In fact, the pain you’re experiencing with your current BD has to exceed the pain of moving on, especially since the old days of “block” transfers are long gone. Today’s transitions are like going through a divorce and remarriage in 30 days with 300 children, but at some point, you may realize it’s worth it. Here are 10 things to consider before notifying your current BD of your intent to move on.
1. Make a firm decision. This may sound simplistic, but it’s essential. All too often, advisors think about leaving their BD and start checking into options. Then they begin to stew over all the paperwork, the effect of a change on their clients, the interruption to their business, etc., taking it all the way to the five-yard line without going for the score. After all that effort, they end up staying with their current BD and their practice often begins a slow death spiral. The point is, be decisive. Either move on to greener pastures or stay where you are and add more water. Both are good decisions. Anything else is a recipe for disaster.
2. Identify your new home. This is no easy task. You must take your time and do your due diligence. Every BD has a unique culture and set of offerings, so consider everything they provide, not just payout or incentive summary. Be sure their culture is in line with yours, because once the “honeymoon” phase is over, you’ll have to work with their people and processes for a long time. You don’t want to set yourself—or your clients—up for another divorce.
3. Read and understand your rep agreement. That document you signed years ago not only outlines your obligations to the firm while employed, it also outlines your obligations—and theirs—upon resignation. It’s important that you understand and abide by their pre-notice requirement. Many agreements require a 30-day pre-notice on either party. This protects both you and them from an immediate termination. This agreement should also outline their obligations regarding payment of commissions post-termination. With that in mind, it’s always best to set your termination date after any large, recurring commissions. For example, if you receive large deposits at the end of each calendar quarter, your termination date should be after those are typically received.
4. Build a project plan. A BD change for a large office must be extremely well choreographed. Ideally, allow three to four months lead time before pulling the trigger. Once you identify a resignation date, you can plan backward to identify your notice date according to your pre-notice requirement.
5. Plan the Paperwork. Every account for every client will have to be re-papered. This can be an organized project or a nightmare. The results will be dependent on the three Ts: time, technology, and temperament.
- Time: You must allow enough time for everything to be prepared, bundled, and ready to go before your resignation date.
- Technology: This project can be overwhelming without proper technology. Third-party vendors like DocuPace can be invaluable here. For a fee (worth every penny), they will help you compile data and populate every form for every account in every household. The success of the operation is solely dependent on your attention to detail and the cleanliness of the data you provide.
- Temperament: Your temperament will go a long way toward making your transition a success. Continuously remind yourself and your staff that this is in your clients’ best interests. Also, by meeting or talking with every client during the transition, you’ll not only receive updated, clean information, but will also identify sales opportunities to address after the dust settles.
Two important reminders regarding this process: first, non-public personal information (NPPI) cannot be shared with your new BD until the client has signed an agreement with the firm; and second, you cannot solicit for sales or dealer change paperwork prior to your affiliation date with the new BD. This is considered “selling away” and a significant FINRA violation.
6. Pay attention to how prior resignations from your firm were handled. This will be a good indication of how your resignation will be conducted. In a perfect world, all managers would be honorable and ethical. Unfortunately, that’s not always the case.
7. Hope for the best but plan for the worst. Even though you abide by your pre-notice requirement, assume you will lose access to all electronic data immediately upon your notice of resignation. With that in mind, to the degree allowed in your rep agreement, be sure you download all client data from proprietary systems—clearing firms, aggregators like Albridge Solutions, and third-party vendors like insurance companies, mutual funds, etc. Be sure you have recent copies of all statements for all accounts. Capture any email correspondence you wish to save from your BD’s email domain and be prepared to turn in any company-owned computers. Ultimately, there’s no such thing as too much data.
8. Do not communicate your plans to anyone outside your office staff and new firm. Communicating your plans to existing clients prior to your resignation date could expose you to legal action. Ensure that your staff maintains confidentiality during the transition period.
9. Understand your product mix. Not every BD has selling agreements with every vendor. Be sure you know what you can and cannot move to the new firm. Understand the new firm’s positions on outside business activities (OBAs). If you sell fixed or indexed insurance products, how are they handled, what products are approved, and how are they paid?
10. Don’t burn bridges. It’s a small industry, so there’s a good chance you will cross paths with your former BD or one of their employees at some point. Be honorable with them on the way out the door. Not only will it keep all your options open, but in the end, it’s the right thing to do.