My firm dealt with two broker/dealer transitions handled in-office within 10 months in 2009.
First, we were part of a large OSJ [office of supervisory juridiction] that left FSC Securities Corp. for Associated Securities Corp., a division of LPL. Then, LPL rolled up all of its brokers under the LPL Financial banner, effectively requiring a second transition.
The experience of switching broker-dealers is akin to selling a house to move to another house – one of the most stressful experiences in life. After all the negotiating, inspections, the difficulties of the physical move, and all the competing emotions, you end up in a home and a neighborhood more to your liking. But there are ways to make what is an inherently stressful process easier. Here are 11 tips on broker-dealer transitions, when you choose to do them in-house rather than outsourcing the process.
1. Be paranoid
I thought this was a bad approach and a sign of weakness. This turns out to be a healthy attitude and important strategy because it means you are always asking the questions: “What could go wrong?” and “Is this the best way to get this done?”
2. Track everything
Working under the rules of the regulators and broker-dealers, make lists of clients, accounts and holdings before, during, and after the transition to help track the transfer of accounts. Otherwise the transition will resemble a dysfunctional time warp. It will feel as if you are trying to transport a person over time or distance where some individual body parts make it, and some simply do not.
3. Visually verify
Just because an account is opened successfully does not mean it is funded. It does not matter if the paperwork is in good order, and that you can see it scanned and accepted at your broker-dealer. You want to check the account balances to make sure every single asset and every single dollar makes its way to your new broker-dealer. It is not about your fees and commissions. It is about doing a great job and avoiding client disappointment when they realize you forgot their Roth IRA or 529 account. You assure them that your new broker-dealer will be a better experience. A forgotten account regardless of the reason is never a good experience.
4. All roads lead to the client experience
The client’s inconvenience during this process should be acknowledged and minimized. If it takes twice as long to do the work internally to save the client half the amount of hassle, it is worth the effort. Consider it an investment in the client experience. This is especially true when it comes to paperwork. Do not drip requests for signatures to clients over time. Get your act together and deliver all necessary documents at one time, even if it means that you do not get paid until all of the BD requirements are met and exceptions worked out.
When your BD assures you that you have all the paperwork needed to move forward, be paranoid: Ask several different people the same question and wait for a little time to pass. There is potentially another form that will need to be signed.
5. Set expectations with your clients
When you think you have packaged together everything you need for the client’s signatures and feel that this will be the last time you will need his or her assistance, resist the urge to say that this completes the process for them. Such a remark is well intended – but you may actually need your client’s help again. Be truthful. Set the stage for needing that additional help by indicating you will be back in touch as soon as you hear from the broker-dealer if there are any other details that require more attention. Assure them that you will make any additional requirements needed for the transition as efficiently as possible.
6. Plug into the feelings of your staff
You are the person most agreeable to change, because it is the nature of a business owner to understand the need for change, but the people most affected are your staff. They probably hate change, and might view you as Satan for driving the bus that leads them to hell. They are losing sleep, wondering how this will all work. But even Satan can be an effective bus driver. As you push work and change through your staff members, remember that they are looking to you for leadership. In the face of chaos, be honest but be positive about your experience and feelings. Also, don’t feel that you, as the leader, need to share every bump on the dirt road you are experiencing. Keeping it to yourself is why you get paid the bigger bucks.
7. Be persistent
While it can feel like passing a kidney stone you need to finish the job. If you feel like you’re losing ground, then take a breath, and then forge ahead. The quicker you deal with the issues, the sooner the transition period will pass.
8. Watch your language
Lots of things will happen that you will not expect. You will be dealing with people at the new broker-dealer on whom you become dependent, but with whom you do not have a relationship. You need them to help solve the sticky transition issues. Remember to watch your language in your interaction with others. Bad language is a single reason needed for the broker-dealer transition staff to legitimately put your paperwork on the bottom of their pile.
I found that being honest and direct, and holding people or departments accountable has been more productive than getting downright rude. The directness may still feel like aggression to the receiver, but it is certainly not unprofessional. In the end, I always hope that this approach helps the other party learn and grow. Probably not, but it is the honest thing to do and does get things done.
9. Take the opportunity to leave behind difficult clients
Free yourself from clients you try to avoid when their names come up on caller ID. It does not matter how big they are. Difficult clients will shave years off your life and will suck the joy you have for the business. In the long run, time and the quality of a relationship is more important than money. So what happens to the clients left behind? If the advisor makes a referral to another advisor, the referral could make the departing advisor subject to litigation. Instead of making a referral, allow the client left behind to become the responsibility of the former broker-dealer.
10. Explore new territory
There are lots of bells and whistles at your new broker-dealer that initially attracted you to it. This is why you moved. This is the end game. Learning new systems, new technology and new people can be overwhelming at first, but there’s lots of time to pick up the pieces and grow your experiences and business with new tools and new ideas. The support staff at your new broker-dealer is smarter and probably even better looking, then the staff at the old broker-dealer. These are benefits that become more apparent after the first six months when things settle down.
11. Be paranoid. This cannot be said often enough over the course of your transition.
Rich Arzaga, CFP®, CCIM is founder and CEO of Cornerstone Wealth Management Inc. of San Ramon, Calif. He can be reached at email@example.com, or 925.824-2880.