It’s not quite so smooth as you make it sound.   Ask your friends how exactly they handled their training contract, or if they waited until they had fulfilled the service requirement (typically 3 years, but can be longer depending on the firm) contained in that contract. 

If you are contemplating this strategy, be very aware of the terms of your training contract as you may be obligated to write a big check to your old b/d, or convince your new b/d to do so as part of the terms of your switching.  

The Catch 22 is new b/ds typically only are willing to cover that training buy out cost if you have already built up a good book, but if that were the case, why would you need to switch firms?  No salary will exceed the money you can make from a good book.

Morphius,

I would say rarely does someone early in their career make a jump like you are discussing unless they are not making it.

Thanks for the clarification, runner. 

B/Ds absolutely protect themselves through the terms of their training contracts, which generally run at least 3 years AFTER you complete training and enter into regular production.  This end of salary is typically not what defines the end of the required training length of service.

If you are referring to someone who has truly fulfilled their training LOS obligation, and then transfers to a new b/d as a trainee FA rather than as a transfer FA, I’d have to assume their “book” was non-existent or so small that they couldn’t survive otherwise, as they would otherwise make more money through straight production that any training contract.

As for the new B/D, they figure their odds are not much better than taking a new/new trainee, but at least they don’t have the cost of the licensing and non-production period, so all they are risking is the salary vs. the salary during non production plus training costs.  Their motivation for doing this would probably be driven by the BOM’s need to hit his recruiting targets for new trainees and/or transfer FAs, or perhaps because their production hurdles are much lower than those of the 1st B/D.

Bottom line is that this doesn’t happen much.  In the final analysis, if someone couldn’t build a (transferrable) book they could live off of in, say 3-5 years at their 1st b/d, what are the odds they will be able to do it the second time around? 

I suspect the details of your friends’ situations are more than meets the eye, and more than they want to share with anyone.  Better to sound like you cleverly manipulated the system than admit you barely survived.

Morphius, 

I couldn't agree more.  A lot of FAs are not fully honest when talking to clients.  Why would it be different with colleagues?  I also wonder how some of these FAs handle non-compete contracts when making transfers like this.  If anyone could comment, I would appreciate input.

I have a friend of mine who is a bright individual.  He used to work for a major wire (like SB,ML, or MS) and he left to go work for a bank as a FA in another city.  He said he didn't have to sign the non-compete, or that he negotiated the non-compete from including clients he was already bringing to the wirehouse, can't remember which.  At any rate, he told me, "You don't want to work for a wire.  They have "fancy" Wall Street names, but they are all the same.  They work you to death until you leave and keep the clients you brought in."  I took his comments to heart, at first.  However, after talking to others, I have the distinct feeling he either just could not bring in the assets or didn't get along with the office.

I’d imagine they are indeed barely surviving but have found a way to keep themselves in the business for a few more years.