Planning Is Everything

Planning Is Everything

Once you have decided to switch firms, it is essential that you know exactly what you need to do and how you are going to do it.

General Eisenhower once said, in reference to the invasion of Normandy, “Plans are nothing; planning is everything.” In other words, you may have to ditch your plan, but if your planning is thorough, you will be prepared for most contingencies. This is apropos for financial advisors. Moving to a new firm has always involved a certain level of advanced preparedness and flexibility; in today's vastly changed landscape it takes an added measure of both.

I recently had occasion to work with a multi-million dollar East Coast team that was frustrated with their wirehouse firm and had decided they were going to move to a new firm within six months. The team consisted of three partners (we'll call them the “AFS Team,” for “Alex, Frank and Stan”) and produced approximately $3.4 million in revenue on almost $400 million in assets under management. They had never moved before, but knew that they wanted out.

Once you have decided to move, it's critical that you create a timeline for your transition to the new firm and that you ask yourself some key questions.

  1. Will it be easy for me to do the kind of business I do at the new firm?

    The AFS team carefully reviewed their clients' portfolios to be sure that they did not contain any proprietary products that were non-portable and illiquid. They also ensured that the current money managers they were using were approved and available to them at their prospective new firm. In addition, because they do some mid-market institutional business, they made sure there would be little or no duplication of accounts once they moved.

  2. How many of my clients will follow me?

    Next, the team members had to estimate which clients would come with them to their new digs. Because they have legal and fiduciary obligations to their current firm, they could not simply come out and ask clients whether they would follow them to a new firm, so the team conferred with legal counsel and came up with a conversation template that sounded something like this:

    “You know how important you are to us as a client, Client X, and that every professional decision we make is always based upon what would be in the best interest of our clients. As such, we want to be sure that you are 100 percent happy with the service that we have been able to deliver as employees of (current firm).”? LISTEN, LISTEN, LISTEN!? “As you know, the landscape of the industry has changed quite a bit lately and we are doing our homework to be sure that remaining at (current firm) remains in the long term best interests of our clients. Do you have any thoughts about that?” LISTEN, LISTEN, LISTEN!

    The AFS team was able to determine with almost complete certainty that 85 to 90 percent of their clients would follow them to wherever they landed, and that the remaining 10 to 15 percent didn't generate enough revenue to make a real difference to them either way. More importantly, the disclosure made their clients feel that they were an important part of the process.

  3. What are the legal requirements related to my move?

    Next, Alex, Frank and Stan consulted with legal counsel on existing employment agreements to see what kind of client information they could bring to their new firm. On average, it will cost about $5,000 to $10,000 for a good attorney who specializes in financial advisor transition and employment issues. But if you're negotiating a multimillion dollar deal for yourself, spending a few thousand dollars on competent legal advice is money well spent.

  4. What will be expected of each team member before, during and after the move?

    The final preparatory step that the AFS team had to take once they determined where they were going and when, was delegating tasks. Alex became the point person who dealt primarily with the new manager, ironing out the details of the deal structure, office space and similar issues. Frank, who was more technologically savvy, worked with the new firm's IT department to become familiar with their systems so that the transition would be smooth. Stan was responsible for dealing with their attorney and product people.

    As the moving date was approaching, there were, of course, a number of other issues that arose but all of these items were quickly resolved. AFS moved on schedule and transferred 90 percent of their assets in the first 60 days. A growth plan was soon in place.

Writer's BIO:

Mindy Diamond
founded Chester, N.J.-based Diamond Consultants, which specializes in retail brokerage and banking recruiting.

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