Brokers tempted to leap at a lucrative job at another firm are often held back by inertia, but in increasing numbers they are finding the powerful force they need to get moving: hungry branch managers.
Managers, of course, have always been some of the best recruiters in the industry because luring top-producing reps to their office translates into dollars in the managers' pockets. Still, convincing brokers to move is no cake walk. “I have 537 clients, in all different kinds of products, and in all different geographical locations,” says one broker. “The thought of having to move the book is so overwhelming to me, it is easier to stay put.”
This is not an uncommon reaction to the suggestion that a career can be enhanced by changing firms. But branch managers increasingly know the right words to speak to get brokers moving. “The only entity getting rich from a broker's long tenure is the firm,” says one.
Recently, a sought-after wirehouse broker with $1.1 million in trailing 12-months production, $150 million in assets under management, 40 percent of his book annuitized in fee-based products and a clean compliance record accepted an aggressive transition package from a rival firm. Although this broker will not be making the move until the middle of the first quarter, he is already grappling with the administrative issues and legal hurdles involved with moving his book of business. He is receiving significant help on this front from his manager-to-be.
Like most branch managers, this one proved skilled not only in convincing the broker to make the move, but also in smoothing out the administrative details from the time the broker accepted the offer to the time he is in his seat at the new firm.
Another wirehouse branch manager interviewed for this story says he has two “punch lists” of issues to address — one for prospective brokers and one for those who have accepted an offer. While a broker is doing due diligence on a prospective firm, the questions he lobs at the branch manager are usually macro in nature — what are the firm's wealth management capabilities? What's its technology like? What access does it have to hedge funds?
After acceptance, the manager's work gets more detailed: answering questions related to the broker's book of business and how to make an effective transfer of assets, the mechanics of certain products and their portability and liquidity. Other serious details include: how fees will be handled, how accounts are opened and transferred and how to improve portability of proprietary products.
Show It to Me Now
At this point, brokers often want to know when they will receive their transition money. The cash portion usually comes within four weeks of the broker's start date, because the firm needs to validate production and asset data first.
The new recruit is then put in touch with outside counsel who can coach him through the legalities of the transition process. The new “hands-off” protocol accepted by the largest broker/dealers (who have agreed to refrain from using temporary restraining orders against departing brokers) is contingent upon a broker not announcing his move to clients before he has actually started in his new position. If possible, it doesn't hurt for a broker to retain his own legal representation to get an objective source reviewing contracts and an accountant to discuss the tax ramifications of the transition package.
Another major issue is the account transfer process known as the ACAT. As soon as a broker accepts a new job, he should prepare a spreadsheet that includes the name of each of his clients, the type of account each has and the client's other contact information. Once a move is made, the broker, the new branch manager and the sales assistant can use the spreadsheet to contact each client about the prospective transfer of assets to the new firm.
But before a broker makes a final decision to jump ship, he should meet face-to-face with key clients to ask the following two questions:
What would you think of my making a move that would require a transfer of your assets?
This shows the client that the broker values his opinion. (Note: a broker cannot be specific about the timing of his pending transition or about the name of the firm to which he is moving.)
What other brokerage firms are managing a portion of your assets?
This is absolutely imperative. Recently, a wirehouse producer, about to accept an offer from a competitive firm, discovered during lunch with one of his best clients that this client already had an account with the firm he was considering joining. This account duplication would have made the move financially punishing.
Discretion, of course, is important. Once a broker accepts an offer, he should plan on moving in the near term to protect his production and his sanity. Anecdotal evidence suggests that once a broker has accepted a new position, his “head is not in the game.” He needs, though, to take time enough to prepare his clients and to allow the new branch to handle the administrative details necessary prior to his arrival. The fewer people who know about the impending move, the better. But make sure to enlist the help of a branch manager.
Writer's BIO: Mindy Diamond founded Chester, N.J.-based Diamond consultants, which specializes in retail brokerage and banking recruiting (www.diamondrecruiter.com).