There’s often a hesitation to move a book of business from one broker/dealer to another. Many advisors who may feel like a move would be a good step for their business fear their clients won’t follow them, or that the transition process will become a nightmare—a painful disruption that really, at the end of the day, they don’t have to endure. Most advisors don’t do it. It’s not easy to move millions of dollars.
All of that was on the mind of Michael Bonevento, Craig Laday and James Costabile, partners at Wall, N.J.-based Intellectual Capital Group, who, despite the fear, recently brought their $800 million book of business from Ameriprise Financial to LPL. It took around two years of planning, followed by 30 hectic days of actual transition. It was made easier, Bonevento said, with the on-site and virtual support from LPL, who created an 11-page playbook with daily, weekly and monthly steps to the transition, and the firm’s DocuSign technology, which helped make the client transition as smooth as possible.
“The scariest part for the advisor is, ‘Will my clients come?’” says Bonevento, founder and managing partner of ICG. “You think you’ve served them well. You think you’ve got good relationships. You think they’re loyal. This transition tests that. What I learned is, we make a lot of promises to our clients, and we keep them.”
That client loyalty panned out. Within a month, ICG had moved 70% to 80% of their assets. All but two of Bonevento’s clients moved over.
The Trigger
Bonevento said he saw a need to create an organization that would remain relevant and sustainable as the industry evolves, and would allow for a business that could become a multi-generational practice. That would require an attractive economic package to recruit the younger generation.
“When we looked at the economics of it, we said, ‘Hey, [LPL] is a platform that would allow us to attract advisors, pay them handsomely for what they actually do, and yet still have a margin for the organization, so we can have additional resources to invest in ourselves,’” Bonevento said.
They also wanted to be able to approach retiring advisors and have an attractive platform for them to come on board and partner with these younger advisors who could eventually take over their books of business, Laday said.
Their ambition is to grow from a practice, with millions in assets under management, to a business, with billions to manage, and they felt Ameriprise couldn’t help them achieve that kind of scale.
“At some point in time you hit a ceiling and you’ve got to realize, I’ve got to go outside so I can grow again,” Laday said. “Ameriprise took us as far as they could’ve taken us, and in order for us to achieve the vision that we want for ourselves, we needed to be able to continue to evolve.”
They went through a two-year vetting process, interviewing about a dozen different organizations, including Dynasty Financial Partners, HighTower, Commonwealth Financial Network and the wirehouses. They even included Ameriprise in those discussions.
“Our conversations with them were, ‘We don’t want to change for the sake of making change. It’s disruptive to the clients. It’s disruptive to the advisors. It’s disruptive to the organization. So if we’re missing something, help us understand what we’re missing,’” Bonevento said.
But for a number of reasons, they felt Ameriprise was no longer a good fit. For one, they found there to be a big difference between being an independent franchisee, under the Ameriprise umbrella, versus an independent advisor.
When the team first joined Ameriprise’s franchise channel nearly 25 years ago, they had to sign a franchise agreement, which comes with certain limitations. The firm sells proprietary products, for instance, and there are sales contests and incentives to sell certain products.
“I don’t need to play that game,” Laday said. “I want to be able to just have a stable of solutions, have a supportive creative team to get from point A to point B, and quite frankly, I want to feel like we’re partnering together versus working for someone.”
In addition, Ameriprise is in five or six different businesses, including life insurance and asset management.
“If you’ve got multiple businesses, right then and there, I don’t want to use the word ‘conflict,’ but it’s a conflict,” Bonevento said.
LPL rose to the top of their list because it doesn’t have other lines of business besides its broker/dealer and corporate RIA platforms.
The choice was made more apparent after the team left, he said. Ameriprise told Bonevento that the firm had the right to keep his clients because his team “grew up in the Ameriprise system.”
“I said, ‘I’m a franchise owner. I didn’t grow up in your system. I pay my own rent. I pay my own staff. How did I grow up in your system?’” Bonevento said. “That was a little troubling for me.”
Ready, Set, Go
In preparation for the move, the team started looking at their books to understand how many accounts, clients and households they have, and what they’re invested in. That involves the “product mapping” process, where you analyze the share classes of mutual funds, individual positions, annuities and insurances clients currently have and find comparable products at the new firm.
Other preparations involved meeting with outside legal counsel, reviewing outside business activities, submitting onboarding documents and marketing materials for approval, finalizing a repapering strategy, reviewing LPL technology, submitting direct deposit and remote deposit forms, ordering stationary and print announcements, completing required training, finalizing client data and meeting LPL’s service team.
They also had conversations with clients about the move ahead of time, and pre-written client emails so that the day they went live, they had communications going out to the clients.
LPL has a team of 50 to 60 employees dedicated to client onboarding—that includes a team in the field, spending weeks helping advisors transition client accounts and get set up on LPL’s tools and systems. In 2018, the firm spent about 33,000 hours in advisors’ offices helping them move to its platform. Last year, the firm onboarded $27.3 billion of recruited assets.
When the day came for the team’s licenses to move over, everything was turnkey, so the advisors could go into their offices and get on the phone with clients. DocuSign, an electronic signature tool, was key to moving a large number of clients and assets in a short amount of time, said Costabile.
“The electronic signature process to help clients transition their dollars and their accounts was tantamount to our success,” he said.
LPL had a couple people on the ground in ICG’s New Jersey office for two weeks during the transition. But at day six or seven into the transition, Costabile found himself drowning in Automated Customer Account Transfer Service (ACATS) filings, and called LPL asking for more help. The firm had already anticipated the need, he said, and had another service team member on their way out to the East Coast.
Of course, snags came up during the process—one being the transfer of trusts. Ameriprise didn’t require the actual trust document, just the certificate of trust, so Bonevento figured that was industry standard.
“All of sudden you start moving trust accounts, and it’s like, ‘We can move the account, but until we get the trust document, the account’s restricted.’ ‘OK, no big deal. Let me go to the client.’ Client says, ‘I don’t know where my trust document is,’” he said. “That was kind of a snafu because if the client had the trust document, it would be easily fixable.”
They were fortunate enough that none of their clients’ attorneys were retired, so they were able to get all the necessary documents.
Too Many Emails
The new account opening system was the source of another snafu, although the team quickly adjusted. To sign the account opening documents, a client would receive multiple emails. Costabile said they’d get the series of emails and maybe pay attention to one but then disregard the other seven.
“Sending clients these emails on top of 30 other emails that they may have gotten throughout the day in their personal or work email was not working,” Costabile said. “I said, ‘We’re not going to just send them anymore. What we’re going to do is we’re going to create 15-minute time slots with clients.’”
Then an advisor would walk the client through each email during that 15-minute time slot to make sure they signed all the necessary documents.
“That one bottleneck that was starting to occur and could’ve gotten really large really fast in terms of assets that we’re not getting here—we’ve kind of corrected that.”
LPL has recognized this bottleneck, however, and starting this summer, the firm is consolidating the account opening process into one signing event, a la Amazon.com.
Rich Steinmeier, managing director and head of business development, said he and his team is also reducing the number of data elements that need to be completed at account opening by 25 to 35%.
“The transition is over, thank goodness, but I think about the 30, 40, 50, 60, 70 clients that we’ll bring on organically this year,” Costabile said. “I think about the $60 million practice acquisition that we’re about to close on in the next 60 days after only having been at LPL for 60 days. And I think about the experience that those advisors and those clients will have based on the work that Rich [Steinmeier] and the team were doing to make that one single experience.”