So, you've decided to pull the trigger and switch firms. The deal is in writing and moving day is only a few weeks away. You may feel that, at this point, you've done everything you can, and the rest is up to fate. But even in the final days before you tender your resignation to your current manager, there are a number of important things you must take care of, and a few points you should consider negotiating. The time to nail down the details is before you arrive, when you are able to bargain from a position of strength.
Attorney: It is critical that you retain a quality lawyer who specializes in advisor transitions. Having your brother-in-law represent you in municipal court for a speeding ticket is one thing. Dealing with the nuances of brokerage employment contracts, the accompanying promissory notes and other critical negotiations, is no piece of cake and should be handled by a professional who does this kind of work on a regular basis.
Contract: Because of the Broker Protocol, the actual contracts that you sign may not be available until just before your move. (Under the protocol, advisors are allowed to move between signatory firms without facing an injunction as long as certain criteria are met.) Still, you should ask for a copy of a sample contract sooner so that your attorney can review it and identify any issues that might need to be negotiated. Remember, the contracts are written to protect the interests of the firm you are joining, so you need your attorney to be your advocate.
Memo of Understanding (“M.O.U.” or “Side Letter”): While most firms will only write the basic tenets of a deal into the contract (such as details of the transition package and length of the forgivable loan), there are numerous other items that you will want to have in writing — specifically any changes in fees charged to your clients, and any loan rates to which the new firm agrees. These additional agreements are usually contained in a “side letter” or Memo of Understanding.
Fees: Who will cover your clients' ACAT fees? If your firm will not pay for them, will it front the costs and then recoup them out of future commissions? How about travel and expense allowance (T&E)? Will it cover your marketing and advertising budget? If you conduct periodic seminars to attract new clients, will your new firm allow you to continue doing this, and will it pay for them? Will it provide you with a paid-for sales assistant? If not, will the firm pay to support your current assistant for at least six months?
Who Owns your Clients?: Typically, your employment agreement with a new firm will specifically state that the firm “owns” your clients. That means that if you leave, under certain circumstances, the firm can stop you from soliciting or serving those clients. But some advisors have been able to get the new firm to agree to a “carve out” on client ownership, with distinct terms for those clients you bring with you to the new firm versus those you acquire during your tenure with the firm. While the Protocol ultimately covers much of this territory, it is always best, separately, to have language in your employment agreement that specifically states that certain clients “belong” to you.
Transition & Onboarding: Onboarding and transition support is more the rule than the exception at firms these days. If your firm does not have this type of support in house, you should try to get them to pay for an outsourced onboarding firm to assist you.
What Production Number will my Deal be Based Upon?: Because of all of the market turmoil, some firms permit an advisor to use his best 12 out of 14 months of production. See how flexible your new firm will be on this issue.
Announcements: You should agree upon the manner in which your move will be announced by your new firm. Where will it be announced? Will the firm do a mass mailing? Will it alert Registered Rep., Dow Jones Newswires, Investment News, etc.?
Making the move to a new firm is much more than negotiating a transition package. As you reach the five yard line, make sure you and your team are well placed to score big.
founded Chester, N.J.-based Diamond Consultants, which specializes in retail brokerage and banking recruiting. www.diamondrecruiter.com