Ask the Ethicist

Dan Candura answers readers’ questions on the ethical dilemmas financial advisers face.

Ask the Ethicist: How to make a U-turn after retirement

Can a retiree with a small practice join a firm without giving up her hourly clients?

Nov 21, 2016 @ 6:25 pm

By Dan Candura

This month's question concerns a woman who worked for many years in wealth management before retiring to an hourly consulting practice. Now she's thinking of returning to the workforce at a registered investment adviser firm.

Q: I worked for many years at one of the leading wealth management firms. I retired from that firm and developed a nice consulting practice, where clients pay me an hourly rate to advise on a variety of wealth management issues. I am now considering joining a prominent RIA. Can I continue to consult with these existing clients “on the side,” or do I have to contribute those revenues to my new firm?

(More: Ethical considerations advisers need to think about before switching firms)

A: Congratulations on starting over in retirement. With so few women as practitioners, the profession, as well as your new RIA firm, benefits from your continued involvement. While it would seem simple to continue working with your old clients “on the side” as if nothing changed, in reality things did change and your new firm will want to take a position on the matter. Their business model (as described in their Form ADV) would determine whether the firm's investment adviser representatives may charge hourly fees for the kinds of services you delivered in the past. Most likely the firm has policies that describe the kind of outside interests allowed for their employees. These policies are designed to create a wall between firm liability and employee liability. Without this delineation, consumers and regulators are unable to determine which activities are within the control of the firm and which are not. Your advisory activities on an hourly basis may be too similar to the firm's advisory business for there to be sufficient separation.

I would suggest that before you join the firm, you discuss the matter in detail with the firm principals and attempt to ask under what circumstances you would be allowed to continue to serve your existing clientele.

(More: Ask the Ethicist: How should an adviser avoid getting caught in the middle of a domestic dispute?)

They may be able to create a mechanism that would allow you to keep some of these relationships. It would be unethical to do so without their consent and may be a violation of your employment agreement. Putting all of your outside business activities on the table ahead of time gives you and the firm an opportunity to resolve the matter to your mutual benefit.

Dan Candura is founder of the education and consulting firm Candura Group. Write to him to submit a question. All submissions will be treated confidentially.

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