Anecdotal evidence shows that clients are usually more loyal to their advisors than they are to their firms. But why risk it? If you are switching firms, it's much better to assure them that any fears they might have are unfounded and explain to them the benefits. Here are five questions you should be prepared to answer.
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Is it going to cost me money?
Any answer other than “no” will certainly raise the ire of your clients and cause them to seriously consider moving with you. But in today's environment, most advisors and their new firms work together to waive any fees or transaction costs involved in moving an account to another firm. These ACAT (Automated Customer Account Transfer) fees can range anywhere from $75 to $150 per account (depending on the type of account). As an added inducement, you and your new firm might offer a reduced management fee or lower trading costs to select clients. Still, one former wirehouse manager now in the independent space says one should proceed down this path with caution. “It is a slippery slope because it is difficult to raise or impose fees after the agreed upon reduction period.?Clients tend to believe they can go ‘shopping’ for lower rates after having seen what the firms can and will do.”
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What is in it for me?
You should be able to articulate the differences between the new and old firms. For example, perhaps your clients will be able to choose from a wider variety of products or lower their money management fees or commissions. Or perhaps the online technology is more user-friendly or the firm offers lower interest rates on loans. Whatever benefits there are for your clients as a result of the move, be sure that you can quickly point to them when asked.
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How come you didn't talk to me about changing firms before you moved?
As a general rule, most FA's do not switch firms unless they are confident that at least 70 to 80 percent of their clients will follow them. While you are restricted from soliciting your clients to move with you or providing them with details about the new firm while you are still employed by your current firm, nothing stops you from having a one-on-one conversation with your key clients to discuss the likelihood of them moving with you when the time comes.
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Will you be able to serve my investment needs adequately at the new firm?
Most major firms have similar or identical investment product offerings. Still, make sure that you have noted any unusual or “out of the box” investments or products that your clients might currently have and would require going forward. Also, if you are contemplating a move to an RIA firm or independent broker/dealer, be ready to answer the question: “Is my money going to be safe there?” In both the wirehouse and custodial worlds the firms are members of SIPC (Securities Investor Protection Corporation) and brokerage accounts maintained are insured for up to $500,000 in securities. Additionally, most firms provide additional coverage through Lloyds of London with no limits on coverage of securities (there is a cap on cash, however). As part of any due diligence, you should obtain copies of a prospective new firm's custody agreements.
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Will there be a geographical change of your office when you move?
Moving to a new firm could entail moving from one city or town to another, and thus further away from particular clients. But you very well might not see clients in your office anyway, preferring to visit them at their home or office. The bottom line is that you want to remain accessible to your clients. You want to be the “go to guy” for all of their financial needs. Any move that you contemplate must take this into account.
Writer's BIO:
Mindy Diamond
founded Chester, N.J.-based Diamond Consultants, which specializes in retail brokerage and banking recruiting. www.diamondrecruiter.com