How To Plan Your Transition Away From A Broker-Dealer

If you’re planning to transition away from your current broker-dealer, it’s imperative to take a knowledgeable and cautious approach to communicating with your clients. Naturally, you’ll want to retain as many clients as you can, and it might feel counterintuitive to refrain from speaking to them about the impending transition ahead of time. However, any mention of your upcoming move, including even a veiled hint, could have significant consequences.

Broker Protocol

While missteps amid a transition can result in advisors being terminated or roped into litigation, advisors do successfully change firms with ease regularly. Those who do so make certain that they adhere to either the Broker Protocol or their contractual obligations to the firm. 

Because the specifics of each advisor’s circumstances are different, you’ll want to consult with an attorney versed in regulatory and compliance issues before discussing a past or upcoming move with any client, to determine what, when, and how to communicate with your clients. 

The Protocol for Broker Recruiting, or “Broker Protocol,” is an accord between firms established in 2004 to provide guidance relating to the use of client data when an advisor changes firms. It was intended to ensure smoother transitions for advisors and prevent needless litigation. 

The Protocol outlines the specific client data that can be retained in a move and permits advisors to create a spreadsheet to bring with them and to use to solicit their clients following their transition. Thus, advisors leaving Protocol firms are afforded some protection.

However, not all firms participate in the Broker Protocol. 

Contractual Obligations to the Firm

When leaving a non-protocol firm, adherence to one’s employment agreement is essential, as those contracts contain clauses and restrictive covenants about the retainment of client information and client solicitation. Typically, advisors are not permitted to bring any client data with them, nor may they solicit their clients. Instead, they must procure any client information from public sources and work with their new firm and attorney to devise a strategy for informing and retaining their clients. 

Once the move has been completed, clients can be informed that legal and contractual obligations prohibit them from speaking about the move in advance. You’ll want to successfully communicate the benefits of changing firms and assure your clients that their current level of service will be maintained. 

With a knowledgeable attorney and a thoughtful approach to the process from start to finish, you can execute a safe and successful transition. AdvisorLaw’s expert team offers confidential services to help you conduct your due diligence and make sure that you are making the right decisions to protect yourself.

Whether you are transitioning away from a broker-dealer, changing wirehouses, going independent, becoming an RIA, or looking to buy or sell a financial practice, we have the expertise on staff to defend your interests and maximize your profit.

Learn more about AdvisorLaw’s Practice Migration and Transition services. 

For a complimentary consultation, please contact:

Matt Durr, E.A.
Director of Mergers & Acquisitions

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