If in the past advisers transitioning to a different broker-dealer were spurred by the potential to achieve more growth, the next wave of adviser migrations will almost certainly be driven by the new challenges created in a post-DOL environment.
But transitions take time.
Even in today's increasingly paperless, automated environment, there are still forms to fill out, documents to complete, letters and emails to send and much to learn about a potential new broker-dealer partner.
With all of this in mind, here are five steps to ensure a smooth broker-dealer transition in a post-DOL environment.
1) Start with your own due diligence. The hunt for a new broker-dealer should begin with gathering information on a number of possible choices. The main areas for your inquiry would include:
• Compatibility. Consider how well prospective new broker-dealers are aligned with serving your business model and whether they have the resources to meet your needs. Do they have selling agreements in place that align with your current product offerings? Do they have the proper legal protections in place to keep you safe? Also look at whether they have sufficient financial strength to support your business so that it is never disrupted by issues beyond your control — especially on the regulatory front.
• Technology. Align with a broker-dealer that has the latest, most user-friendly technology — it can increase your profits, save time and provide you with a competitive edge. Has their technology platform advanced over the last three years, and is it fully integrated? Also inquire about planned future enhancements, and when they expect to implement them.
• The full range of their offerings. Not every broker-dealer can provide every possible resource or capability, but be sure to inquire about those capabilities that are salient to your practice, especially when it comes to transitioning commission-based business to a fee-based relationship.
• Costs. Consider creating a spreadsheet that includes the following: upfront costs, ongoing costs, errors and omissions fees, Finra/SIPC assessment fee, technology fees and clearing fees. This should allow you to easily compare and contrast firms.
2) Review legal agreements. Because transitioning an advisory business to a different broker-dealer platform involves multiple moving parts, many advisers overlook existing legal agreements they have with the broker-dealer they are transitioning away from. Do you have any retention bonuses or forgivable loans to repay before you depart? Were you granted orphan accounts (accounts that once belonged to advisers who have exited the business or smaller accounts assigned to you by the broker-dealer firm) that you want to retain but that your former broker-dealer may be able to take back?
3) Visit the home office. Once you have narrowed your prospects, visit the home office. This should help answer any additional questions you might have. It's important to spend time with the professionals in charge of the areas most germane to your business, such as retirement planning or fee-based advisory services.
4) Meet the transition team. The transition team can make your move a dream or a nightmare. Ask how many transitions they have done and how complex they were. Will you have a dedicated transition manager and a customized plan with a timeline? In addition, find out how much pre- and post-transition support they offer. Do they provide on-site training and support? Will they conduct weekly conference calls with you as well as with your partners and employees?
5) Talk to other advisers already affiliated with the broker-dealer. Not every answer will come to you directly from the broker-dealer. See if there are any affiliated advisers located nearby and request an informal meeting. Ask them how promptly the broker-dealer responds to their questions and requests, and about the quality of the support it provides. Inquire about the overall corporate culture and whether the advisers are happy with the firm.
Many advisers dissatisfied with their current broker-dealer and anxious about how well they are positioned in a post-DOL landscape are still hesitant to make a move.
But if you are armed with good information and well-founded knowledge, you will be ready to find a new home — one that is more in keeping with your current business, better suited to your growth plans and offers a higher level of service during a time of continued regulatory change.
Austin Moon is vice president of new business development at National Planning Holdings Inc.
