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What to do when your broker-dealer gets acquired

Don't panic, but seize the chance to investigate other firms

Sep 27, 2017 @ 2:09 pm

By Trent Gain

You've heard rumors circulating for some time now that your broker-dealer may be merging or outright acquired by another firm. Then, speculation becomes reality — the firm has just been sold. What do you do now?

Don't panic, but prepare vigilantly

Once you have received the official word of your firm's impending future, you'll have a multitude of questions: What, when, and how will things change? Anticipate FAQs that will be distributed, but do not rely on those alone. Now is the time to contact trusted personnel at the home office of your current broker-dealer who can provide additional insights into what to expect. Ask the hard questions. Be informed.

Review the possible impact on your practice

A natural assumption may be that staying with the 'new' firm is not what is best for your business – which may be true. But, do your due diligence. Investigate how this outfit can support not only your existing practice, but the vision you may have for your practice three to five years down the road. Will you be able to continue to use the same platforms? Clearing firms? What differences will there be in how you conduct your day-to-day operations?

You may indeed learn there are significant changes you and your team will have to make that are not conducive to your business model.

Keep employees informed

Staffers are the backbone to all great organizations. Keep them up-to-date on everything taking place and empower them to provide their feedback on the acquired firm, in addition to any thoughts they may have on the new entity and, perhaps, a replacement.

Identify your perfect broker-dealer relationship

More than likely, albeit probably informally, you've created a short list of companies you would consider joining should circumstances ever change. Now is the perfect time to investigate them more formally.

Start by creating a list of those products, resources and services that are idyllic for your practice. This will enable you to conduct more efficient research on other broker-dealers you may be considering. Be specific and list everything you are seeking. Here are some components to consider:

• Products offered

• Size of the firm

• Technology

• Fixed costs associated with being affiliated

• Ownership of the firm: public or private?

• Service and support available to your team

• Any regulatory concerns or issues

Kick some tires

Time is of the essence. If the opportunity presents itself, request a home-office visit to any broker-dealer you are considering joining. This will allow you to see its operations up close and meet with many of the executives and key personnel that are pertinent to your practice. It's also an ideal way to get firsthand insight of the firm's culture and determine if it's congruent with your own.

Create a matrix on prospective firms

Finally, evaluate how each firm measures up to the criteria you and your staff have determined is most important to you. As you conduct your research on each candidate firm, capture the information in a matrix style format. This will prove particularly beneficial when you have concluded your research, and begin to review and consult with your team to see if you all come to the same conclusion as to which firm would be the best fit.

For many of us, change is uncomfortable — understandably. However, even though this change was beyond your control, you can still be proactive. Anyone who has ever moved from one firm to another knows this type of transition is not something to be taken lightly: It will undoubtly be an interruption to your day-to-day operations in the short run. But, with proper investigation and preparation, it will likely pay off in the long run.

Trent Gain is chief operating officer of The Independent Grid.

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