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Transitioning to a new broker dealer or RIA firm is as appealing as using someone else’s toothbrush. You lose a huge chunk of clients, work ridiculously long hours and even suffer a break in compensation.
That’s why I keep my toothbrush in a locked safe.
I interviewed Grier Rubeling, the founder of Advisor Transition Services, to get some insights about how advisors can lessen the pain.
It’s obvious that most advisors want the transition over with ASAP. What are three things advisors can do to make it go faster?
The number one thing is having a transition team in place, whether it’s staff members or hiring someone else. For a team, assign different roles to your staff members. I can’t say enough about the importance of having a dedicated project manager, someone who knows what’s going on at all times. It has to be to the point where if you say, “Where are we with this client?” the project manager can immediately tell you.
The project manager doesn’t have to be the person carrying out the transition activities. If you have a large book of business, someone else can take instruction from the project manager and do the work based upon what is told to them. The PM in this case tells them what to do and the person does it.
If you’ve got a smaller book, then just a project manager alone is all that you would need.
Secondly, create a spreadsheet that encompasses all of your client information. There needs to be one centralized place where everyone can go for all your information. Be aware that if you’re with a company that doesn’t follow the broker protocol, you can’t take any of the client information with you when you leave the company. So that means that you have to get all the info from the client directly.
The last thing is to have a timeline. When do you want to get client info? Who is going to be calling which clients and when? The thing about this industry is when you leave (and especially when you leave a wirehouse), it’s so secretive. You can’t tell your clients or the company you work for. You and your team are the only ones who know what is coming.
Know that you will not follow the schedule. It won’t go smoothly all the time but at least if you plan it will go smoother than if you didn’t plan at all.
How long does a transition normally take?
One to 12 months
Really? You’ve seen someone do it in one month?
I’ve seen smaller advisors with good support people get the bulk of it done in that amount of time. You’re always going to have those straggling clients that sit with the paperwork on their kitchen table for a month before they return it to you. The bulk of the work is done in the first few months and then the rest is clients that just trickle in.
What do advisors commonly overlook about transitions that they should be more considerate of?
Advisors commonly underestimate the time commitment, the problems that will crop up, and the questions that their clients will have.
No matter how good the relationship you have with that client, a large material change in their finances is going to make them take a pause, no matter what. You’re asking them to uproot all their accounts, learn all the new technology, and get new statements that they have to decipher. In some cases you’re asking them to move every single invested dollar they have.
A lot of people don’t realize that and rely completely on the relationship. There are issues that a client might not feel comfortable bringing up in everyday conversation -- but send them a package that requires them to sign 10 different forms just to wipe out the historical data on their accounts, and they may find the courage to address them after all. It just gives your clients a reason to re-evaluate the relationship and sometimes that brings risk.
What are the best actions you’ve seen advisors take to avoid losing clients?
Have a letter drawn up that explains why you are leaving and the reason that it is beneficial to them. You should speak to this letter when you are on the phone with them, when you call and tell them you are leaving and you are sending a giant packet of things for them to sign. Some will sign automatically but others will ask, “And why are you leaving this company after 10 years if you were so loyal all this time?”
Tell them the things that you are now able to offer that you were unable to offer before. Tell them the things you were unhappy with at the prior firm that prompted you to make the change. If they see the logic, they’re more likely to be motivated to make the move sooner.
How does an advisor know if they need to hire someone to help or if they can get by doing it themselves?
If you’re doing it yourself, you can guarantee it’s going to take a lot longer than you think. Most advisors think in terms of weeks when they should be thinking in terms of months.
It also depends if you’re used to doing all your administrative work yourself or not. If you’re leaving a wirehouse and you’ve had a client service associate that has done all this work, I would not attempt to do it on your own. Custodial paperwork is a mess and compliance is only getting stricter.
I remember when I worked in insurance, if you made one mistake then you had to redo the entire application. You couldn’t cross out or white out a mistake.
Sometimes the custodians allow you to get the client to initial but even that is a pain to ask a client to do. There are ways to do paperwork via electronic signature but if you’re starting your own RIA then you have to provide all the documentation, your ADV, your privacy policy, and you have to have them sign your contract. Not all of the custodians will allow you to add paperwork to their e-signature platform because it’s not their form; it’s yours.
How has this all changed from years past – you’ve been doing this for a long time!
The changes I’m seeing are good for advisors but some are less beneficial.
Technology is helping, allowing us to do things by electronic signature and combine accounts into households and receive one signature instead of 30. But at the same time the requirements are getting stricter.
When you’re opening accounts at new custodians they will ask you for things that they never did in the past. For example, opening a trust account you have to provide a trust document showing the setup of the trust. You did not have to do that 10 years ago.
When opening a business account, you will have to provide articles of incorporation and the operating agreement. Some clients don’t even keep copies of that. They have to talk to their attorneys who set up the account. It’s a lot of red tape.
The technology is making it easier but the requirements are making it harder.
Sara’s upshot
I’ve heard some advisors shy away from the decision to strike out on their own because of fear of what stands to be lost. Done correctly and with the proper guidance, a transition is an opportunity to solidify relationships and break through to a better place for your team and those you serve. The resources are there. Don’t be shy about finding them!
I recently launched my financial advisor marketing podcast which you can download here.
Sara Grillo, CFA, is a top financial writer with a focus on marketing and branding for investment management, financial planning, and RIA firms. Prior to launching her own firm, she was a financial advisor and worked at Lehman Brothers. Sara graduated from Harvard with a degree in English literature and has an MBA from NYU Stern in Quantitative Finance.
Read more articles by Sara Grillo
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
