The screaming in your head starts when you decide to switch firms, and the voice always says the same thing: “Call your clients! Call your clients now, before it's too late!”
It's understandable, this compulsion to immediately start in on the most important piece of business, but it's an instinct you need to fight — at least until you address some important preliminaries.
I know from what I speak. My 20 years in the securities industry have taken me to six different wirehouse firms and two independents, and that means I've presided over eight different “transition” periods.
First Things First
Advisors usually pass through four stages on their way to a decision to change firms: dissatisfaction (with a current company), gathering (information on prospective new employers), choosing (a new firm) and committing (to change). It's in this last stage that real work of retaining clients begins.
The first few things you need to do once you've made the decision to switch firms are rather pedestrian: Gather cost basis on your clients' holdings, get their email addresses, examine the new account forms at your new firm and make sure you're familiar with the information you'll need from each client to complete them.
Don't make the mistake of foregoing these tasks. Many a broker has started his job at a new firm, only to discover that, in his haste to depart, he left behind reams of important (if dull) information about clients.
If, for instance, you neglect to retain details of the minimum required distributions that a particular has already taken, you've condemned yourself to some pretty involved sleuthing and paperwork upon starting the new position. It should go without saying that the time devoted to such mundane tasks is better spent elsewhere during the critical early days at a new firm.
In addition, be prepared to pony up some money for a team to help you with your move. While your new firm will offer to help, you'll have more control if you do it yourself.
Let's Talk to Clients
Now that you've prepared diligently, you're ready to contact clients. Here are a few commonly asked questions about this part of the process:
What should I say to clients before the move?
Legally, here's what you can't say: “I'm changing firms. Will you come with me?” However, you can mention that you've had an offer from another firm, and you're in the process of deciding whether to accept it. The distinction's an important one, and firms are getting more aggressive about pursuing advisors who engage in illegal client contact. Witness Banc One's recent suit against five brokers who (the firm contends) illegally took information about high-net-worth clients with them when they defected to Smith Barney.
What NASD rules apply?
Because of the confusing nature of firm-switching rules, it's best to phone your regional NASD office and ask for guidance on your interaction with former clients. Then document the call.
What documents can I take with me?
You can't take company documents without permission, so it's a good idea to ask your former manager for copies of your former customers' statements. Why would a manager do such a thing? Because clients who feel abandoned are dangerous; they complain to the NASD, and they file lawsuits.
What investment strategies should I use before a move?
Same as you have been. Don't raise cash.
How long for a license transfer?
The NASD will approve any license on the same day, but your state can hold it up for 30 days.
On The Big Day, it's a good idea to send a one-page letter to clients telling them where you are. Send forms later when your new firm gives you the go-ahead. Execute mailings to all clients every two days for the first two weeks, in case you can't reach them all by phone. (You are prohibited from calling clients until the NASD and your state approve your license transfer, which they do via email to your compliance office after your old firm files the U5 electronically.)
The bottom line in all of this is simple: Plan ahead, and the transition will go that much more smoothly.
Writer's BIO:
Robert L. Hand is a Pan-American Financial Advisers financial consultant. His Web site, educates brokers on changing firms successfully. [email protected]