Top lessons learned during a breakaway transition

More than two years ago, our team began to explore whether the registered investment adviser platform was better for us than the independent broker-dealer world we were in. Although business was good, we felt it would be beneficial to learn more about the potential for flexibility and technology that being an RIA could offer.

Now, two years later, we have successfully moved our $1.5 billion-plus business and formed an RIA. Through this journey, which is still a work in progress, we have learned many lessons that we believe could benefit others.

Do your research

First, we educated ourselves on the differences between the IBD and RIA worlds. We accomplished this through research, attending conferences and meeting with potential partners. Concurrently, we compiled a list of possible custodians and RIA aggregators. Ultimately, we spoke with at least three aggregators and five custodians.

As we warmed up to the decision to change, we concluded that we would go it alone, form our own RIA and build it ourselves. Although we were convinced the aggregators served a great need, we believed we had the resources in place to move forward on our own.

As independent business owners, we already had a strong infrastructure, including an office, payroll and benefits. If we hadn’t had this in place, we could easily see the benefits of working with an aggregator.

(More: Going independent: Which business model is right for you?)​

Choose a custodian that will make your practice better

After making our first decision to partner directly with a custodian, we narrowed our list to the two custodians we felt were the best fit. We visited both in person, sent staff to both service centers and met with both numerous times. Deciding between these two was extremely close because both were compelling. Ultimately, for us, it came down to which custodian would truly help us serve our clients best as well as differences in pricing structure. During this time, we also began to get a feel for the various pieces we would need to put together: performance reporting, financial planning software, CRM and others.

Give yourself time

At the outset, we envisioned moving quickly. However, it was six months before we voted to proceed, and at that point, we realized just how large this task would be for our team. Faced with year-end, tax season and bonus considerations, we chose a conversion date almost a year out. At first, this seemed overly cautious, but in hindsight, we needed every minute.

(More: Better together? Why not all advisory teams are meant to go independent)

Rely on the talents of your team

Next, we developed an extensive checklist of steps and responsibilities. This list included everything from technology to stationery, and we got everyone involved.

As we approached six months until our go date, the work began to multiply, with tasks like creating spreadsheets of important data, working through the tech platform and reviewing client holdings for compatibility. Ultimately, our team gathered almost 95% of the needed client signatures in 45 days.

We worked long hours, with clients and paperwork coming and going nonstop. However, as a result of the planning and effort of the whole team, we ended up transferring approximately 90% of our assets and revenue within the first 20 days — a feat our custodian considers to be the fastest it has ever moved a practice of our size.

Change never ends

As we completed the client conversion, we soon realized the work was far from over. Much of the heavy lifting was still to be done, specifically with our performance reporting and financial planning. We knew that to make this transition worthwhile, we needed to optimize all aspects of the process. It has taken several months to work on these two systems, but we are now realizing the benefits while maintaining our high standard of client service during each step.

Final thoughts

Ultimately, we know that taking our time, as well as serious planning and hard work, made our transition a success. We would also encourage firms to make decisions from the client view, not the adviser view. Your clients will appreciate you for it.

Although we are confident in our decision and proud of our successful transition thus far, we caution others to make their own choice carefully and consider these lessons we learned for you. The scope of this conversion should not be taken lightly.

(More: 5 benefits of transitioning to independence)​

Bob Nachman is a partner at Nachman Norwood & Parrott, an independent wealth management consultancy based in Greenville, S.C.