Breakaway talks with clients hinge on trust, technology, and a clear ‘why’

When Commonwealth Financial Network last March that it would be acquired by LPL, Adam Spiegelman confronted a decision he had been circling for years: stay in a consolidating broker-dealer ecosystem or finally launch his own RIA.

“I spent dozens of hours doing research, talking to vendors and companies and tuck-in RIAs and broker-dealers and recruiters, trying to figure out why I should not go and do my own RIA,” Spiegelman, a second-generation wealth advisor in charge of Spiegelman Wealth Management, told InvestmentNews. “I was looking for a compelling reason not to. I wanted people to scare me. And no one was able to.”

By July, the firm was operating as an independent SEC-registered RIA with roughly $450 million in assets under management. But before that, the experienced California-based advisor had some explaining to do – specifically, walking clients through the implications of independence, conflicts, and transparency.

“When I fully was able and legally able to tell them, I talked to them about what it meant,” he said. “It meant independence. It meant no backroom dealings and negotiations on fees that were not transparent to clients. And I would be now going direct to the vendors, direct to the custodian.”

While Spiegelman did his best to leave no stone unturned when preparing, he still hit some speed bumps along the way. He described a less-than-ideal experience transitioning to a direct relationship with a large RIA custodian, where paperwork snags and overlapping e-signature systems left clients confused and forced him to act as his own IT desk.

“[The custodian] is a huge bureaucracy,” he said. “We had a lot of technical challenges with clients signing, not being able to sign, or the instructions weren't very clear.”

On one hand, Spiegelman's exit to independence was arguably on the fast side, and the errros that happened didn't impact that many clients. Still, the roughly half-dozen who were affected had to point out wrong addresses or unfamiliar account details during the repapering process, which Spiegelman described as "a little embarrassing" and "frustrating." 

'You have to do your homework'

Brett Bernstein, CEO and co-founder of XML Financial Group in Bethesda, Maryland, has gone through two major transitions in his career: leaving a Merrill Lynch environment for LPL in 2004, and later leaving LPL to launch XML as an RIA in 2016 within the Focus Financial network. He argues that the first break – leaving a big firm brand for the then-relatively unknown LPL – would be the harder client conversation for most advisors making a leap.

“When I was leaving Merrill Lynch and going on my own, people were like, ‘What are you talking about?’” Bernstein said. “And when they walked in and saw I actually had a real office, they got it."

By the time his team exited LPL to form XML – an experience he's jokingly described as "taking off the ankle bracelet" – clients already understood the independent model. But as he recalled, moving out of a wirehouse or bank framework means reorienting investors who have long equated a household name with safety.

“You’re usually going from a brand that people know to one they don’t know. And the custodian is important,” Bernstein said. “At the end of the day, what are the clients really investing in? You, the people. So what they cared about was, ‘Are you still my person and is my money safe?’”

For advisors looking to break away, Bernstein stressed the need to prepare for product and compliance issues well before any client meeting. That includes mapping which positions can transfer and which must be liquidated or shifted.

“I think a pretty significant issue is you have to liquidate any products or proprietary investment vehicles that you're in that maybe aren't transferable. But you should know that ahead of time,” he said.

Beyond that, he said transitioning advisors should be mindful of non-solicitation rules and contractual limits. “Obviously depending on your relationship [with your current firm], you can't solicit your clients,” Bernstein said. “There are agreements that different people in different firms have. So you have to do your homework and know what can and can't transfer over.”

When the conversation finally happens, Bernstein thinks most clients read the move as a sign of conviction. What's important for the advisor, he stressed, is for the advisor to articulate the rationale in client-centric terms.

“If you made this decision, the client will say ‘Clearly have done your research. I've trusted you with my money. You are entitled to make more money. How is it going to benefit me? And am I safe?’” he said. “If you can answer those questions … you’ll have the majority if not all your clients follow you.”

Getting an assist from AI

Bernstein’s moves predate modern AI tools, and he has his doubts on just how much AI could help advisors breaking away. For his part, Spiegelman leaned on ChatGPT as a research assistant while planning his own maneuver toward independence.

“I used AI, specifically ChatGPT a lot,” he said. “I had intelligent questions to ask my attorney, preparing myself.”

Spiegelman also used AI when preparing for calls with technology vendors and comparing proposals. “It helped me to create a technology stack that I ultimately used,” he added, noting that he still did his own due diligence and printed out what he described as a multi-inch-thick packet of analysis.

For Aaron Klein, who founded wealth tech startup Contio last summer with a mission to fix broken meetings, those kinds of stories underline how much is at stake in the breakaway meeting itself – and how AI could help build a game plan for the advisor in the room.

“One of the most important aspects of that is to nail your why. Why are you breaking away? And how is this going to positively impact the client?” he said, echoing Bernstein. “Because the client is the hero of the story.”

In Klein’s view, a well-run breakaway campaign requires three types of support: a “brilliant meeting strategist” to tailor a game plan for each client, a “superhuman memory” to surface past conversations and notes in real time, and a “hyper-intelligent chief of staff” to track follow-ups and paperwork.

“If I think about those three people – the brilliant meeting strategist, the superhuman memory, and the hyper-intelligent chief of staff – I would just say that's what next generation AI is actually able to do,” he said.

The goal, he stressed, is not to put more technology between advisor and client, but to let the interface recede so the relationship can take center stage.

“If you haven't picked the kind of technology that can get out of the way, fade into the background, and allow you to focus on your conversation, you're not going to be able to do your best work,” Klein said.