The Advisors Guide to Changing Broker-Dealers

The Advisors Guide to Changing Broker-Dealers


changing broker-dealer

By: Jim Perhacs, Guest Blogger and Managing Director
Published April 12, 2017

Choosing to leave your broker-dealer is not an easy decision. It’s a major move that can alter the course of your business and impact your future success. Paperwork and legalities aside, there are many steps advisors can take to plan for an effective, smooth transition. It all starts prior to your resignation day with a method of organization and a foundation of client communication.

Preparing to Change Broker-dealers

Advisors anticipating a change should focus on these steps first:

  • Make sure your office is set up to embrace and maximize the technological efficiencies of the new broker-dealer.
  • Get compliance pre-approval for your stationery and any new signage for your office.
  • Have your website pre-approved and ready to go live once you are officially on board with the new broker-dealer.
  • Think about your current client base. Are there relationships that currently create a negative (economically or otherwise) impact to your practice? A transition is a perfect time to either sever client relationships or re-price them.
  • Get an announcement letter pre-approved so you can include it in any paperwork packages that are being sent to clients. I would also suggest getting an e-mail pre-approved so that you can send out an e-mail blast (assuming you are working under the rules of protocol) announcing that you have made a move and you will be reaching out as soon as you can to discuss the details.

Separating your book of business into A, B, and C clients is an effective way to manage a transition to a new broker-dealer. Your A clients typically produce 80% of your firm’s revenue, so at the onset of transition, 100% of your focus and resources should be spent on them. Once you are in a good place with your A clients, move on to your B and C clients. Be sure that your firm is adequately staffed to handle a transition. If not, you may want to consider adding temps to help handle the additional load for the first six months.

The Transition Process

The actual process of transitioning assets looks straightforward on paper, but it can be difficult to execute. Poor planning can cause the transition process to take much longer than it should. With an effective transition, the impact to income should be minimal. In my experience, about 95% of the book transitions to our broker-dealer, LPL, within the first 30-40 days. There are a few variables that could shorten or lengthen this timeline.

Keep in mind that your book of business with the new broker-dealer may not look like it did with the old broker-dealer. Use this time of transition to position the book the way you want it. If you think that it is in your brokerage client’s best interest to be in an advisory account, make that suggestion during the transition period. If you want to leverage third-party asset management instead of being the portfolio manager yourself, have that conversation now. I think advisors are afraid that too much change will scare the client, resulting in them not moving to the new broker-dealer, but we have not found that to be the case.

When leaving your broker-dealer, the most important thing throughout the process is to remember to communicate. Reach out to the client to share the news that you have made a move. Let them know that they will be receiving a package of forms in the mail or schedule a meeting with them. Obtain any of the client information that you could not take from your prior broker-dealer. Use all the information you have to create the appropriate forms to move the assets. The final step in the process is getting client signatures and submitting forms for account opening and transfer.

PAG’s Transition Team Can Take Your Firm to the Next Level

A great way to ensure a smooth transition is to leverage a third party that can guide you through the process. We have been helping advisors transition to LPL and PAG for over 10 years. We have averaged 60-80 advisors in each of the last five years alone. We are constantly searching for ways to maximize the efficiency of our process in an effort to minimize the length of time it takes for one of our advisors to transition. Most recently, we invested to create our own proprietary technology called FastTrack. This online system gives advisors and their staff the ability to send and receive information to and from our dedicated transition team in real time. They also have transparency at all times to see exactly what stage a client is at in the transition process. Our team handles every aspect of the process that is required to move the assets, including all of the paperwork and the opening of new accounts. This allows our advisors to focus on communicating with their clients and giving them exceptional service!