Once you've decided you are moving and have selected a new firm, your focus will naturally turn to your clients. Will they agree to follow you to your new digs? Which ones do you want to come with you? How should you tell them about your plans?

Before you engage in any discussions with clients about a move, there are many landmines you will want to avoid. One wrong step in a dialogue could derail your plans, or cost you and your new or prospective firm a lot of money. To avoid missteps, it is best to seek legal counsel from an industry expert to learn what you can and can't say, as a practical matter, to clients — both before and after a move.

Before a Move

“When advisors talk to me about their desire to switch firms, I counsel them that, first and foremost, they have a common law fiduciary duty to their employer to act in good faith,” says Brian Neville, founding partner of Lax & Neville LLP, a boutique litigation law firm focused on broker/dealer, securities, regulatory, and employment matters. “After that, they must be guided by their contractual agreement with the firm, and then the Broker Protocol to lessen the likelihood of litigation after a move.”

Most firms require advisors to sign contracts that, in part, specify that they cannot pre-solicit clients when contemplating a move, or after a move. But there are ways for advisors to talk with clients about a potential move, keeping in mind that what they say can become evidence at a later date if there is litigation. Some general guidelines for what advisors can and can't say prior to a move include:

  • Speak in generalities to clients. You have a contractual obligation not to pre-solicit but you can say something like the following: “I've been getting a lot of calls from recruiters, and in the past never gave it much thought. But now I am increasingly open to some of their ideas. What do you think about that?” They will ask why — and the best answer at this stage is, “To better serve my clients.”
  • Never mention a list of firms and ask clients to choose. Never say when you are leaving, and never, EVER, ask a client if they will come with you.
  • If a client pushes for specific information, you can say that you have certain contractual obligations to your firm, and are unable to discuss details at that time. If there is a strong relationship between advisor and client, the client will understand. Assure the client that any move you would make is with their best interest in mind.

Once you have had these general conversations, analyzed your client relationships and determined that a move is in everyone's best interest, it's time to do the deep dive into the details of the actual transition.

The Broker Protocol

Required reading for any advisor seriously contemplating a move is the Broker Protocol, an industry-wide agreement established in 2004 by Smith Barney, Merrill Lynch and UBS. It contains a set of industry rules established to further clients' interests of privacy and freedom when an advisor switches firms, and to hopefully minimize litigation. But the Protocol is silent on what an advisor can or can't say to a client with regard to a move — only what documents he or she can take.

Once an advisor resigns from a Protocol firm and moves to another Protocol firm, the contractual agreement with the now ex-firm should be superseded by the Protocol. Nothing in the Protocol says that advisors cannot solicit clients once they resign from their firm.

When you actually begin calling clients to let them know that you have moved, and are now with a new firm, it is vital that you communicate from the start that you analyzed the move both in terms of the value for yourself and for the client. Be ready to discuss the ways in which the move will benefit the client. Also important for them is what won't change — access to you, timeliness of wires or cash, fees, etc.

The bottom line: Moving to another firm is an exciting and stressful event, but if you believe you've made a good, sound decision for all the right reasons, everything will fall into place.

Writer's Bio

Mindy Diamond is president of Diamond Consultants of Chester, N.J., a nationally recognized boutique search and consulting firm in the financial services industry.