Transitions

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Over the course of a year, not a day passes by without an advisor leaving one broker-dealer for another. Oftentimes, he or she will make this move without understanding what to look for, how to find it and why it matters so much. The truth is that advisors are compensated by their clients to manage wealth, pro-vide investment guidance and to evaluate the options as they relate to client assets. Advisors aren’t paid by their clients to find a new broker-dealer.

The transitioning process is much like a triangle, bearing three sides which together form a perfect shape or outcome. Let’s think about a bar stool with three legs. Can you sit on

it without all three? Perhaps with a buddy holding you up, you can. That doesn’t help if you are alone and trying to support yourself and avoid falling. This theory holds true when advisors decide to make a transition from one broker-dealer to another.

On a regular basis I field calls from my clients and prospects (fi-nancial advisors) to evaluate the upfront capital for them, without mentioning the importance of business connectivity or support for their clients. Since when did this business become all about the money received by an advisor and not the ability to enhance your client service model? Isn’t that why your clients hired you in the first place? Understandably, there will be expenses involved in tran-sitioning to a new broker-dealer, but that should never rise above the client’s best interests.

Given the circumstances above, I believe there are three core areas of focus in order to find success in your broker-dealer move and your transi-tion of clients.

TRANSITION LEG #1: Benefits to the Clients

The single most important aspect to focus on when transitioning from one broker-dealer to another is how it will improve the ability to service your clients. This applies to technology, access to investments, improved execu-

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Transitions

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tion on trades, flexibility on how you prefer to interface with your clients along with the stability and integrity of the new broker-dealer. An advisor should confirm how the new firm benefits their clients.

An easy exercise is to create a plus and minus chart. You put all the positives under the plus column and all of the negatives under the minus column and compare the over-all picture. Make sure to keep in mind the business model you have and how you service your clients and the appli-cation of the new broker-dealer to support that model. It doesn’t matter how sophisticated their advisory platform is if you only do stock and bond business with your cli-ents. Remember, this is your business, so be firm when you are requesting information from the broker-dealer. Never, ever settle!

TRANSITION LEG #2: Benefits to the Advisor

Isn’t it fair to put the client first? I agree. You come in a close second though! When thinking about the benefits to you, think about the down time you plan to incur. Will you be starting your own independent practice? Do you need financial assistance or upfront capital from the broker-dealer? Would you like to be part of a peer-group or study group to enhance your service of-ferings? Is buying another book of clients from an advisor in the cards for you, and will that firm assist in the financing of a purchase? See if your broker-dealer can help with the financing.

As you research your options and discuss the transition process with different broker-dealers, think about what you are currently missing at your current broker-dealer. What are the greatest benefits your broker-dealer pro-vides? Put these down on a list if you can’t do business without them. Make sure your new partner can accommo-date or improve on every aspect. Think about the down-

side of being with your current broker-dealer. What gaps are present that need filling?

Whether you are making a lateral move from one wire-house to another, or looking as at independent broker-dealer, strengths and weaknesses are present and need to be evaluated. If you feel you don’t know what questions to ask or how strong your current broker-dealer is, then hire a firm to help you. When working with our clients, we require each advisor to complete a profile on their cur-rent business model and a map to the desired business model. The market is shrinking on the wirehouse and bank platforms, but more than 4,000 options exist on the independent side. Do your homework and take your time. You only have once to negotiate your deal, be smart and stick to your guns!

TRANSITION LEG #3: Sup-port During the Move

The third most important aspect of a transition is what support the broker-dealer is going to provide during the move. This covers the new account forms, executed transfers, a proven process for transitions, any fi-nancial assistance with down time, waiving ACAT transfer fees, etc. Find out how long the average transition has taken them in the past six months as well as the number of transi-tions they plan to work on dur-ing your transition. The point here is that you should never feel like a question is off limits when it comes to your transi-tion and what the broker-dealer can do to help you.

Successful Transitioning

TRANSITION

LEG #1:

Benefits to

the Clients

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Transitions

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MagazineSuccessful Transitioning

This needs to be covered beforehand; once you are in the transition, you cannot stop or pause the process, as this can negatively impact your clients. If you feel like the broker-dealer isn’t being honest with you or they have left a number of questions unanswered, move on with your search. The transition is an integral aspect of the process and you need piece of mind during it.

Best of luck as you work to find a better business partner for you and your clients.

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Ryan N. Shanks is Founder and CEO of Longmeadow, Massachu-setts-based Finetooth Consulting. Finetooth is a research-based con-sulting firm, providing Transition Advisory and Practice Advisory ser-vices to Financial Advisors, Regis-tered Investment Advisors and Bro-ker Dealers across the country. Visit

Finetooth online at: www.finetoothconsulting.com