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 will 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 advisers being terminated or roped into litigation, advisers do successfully change firms with ease on a regular basis. Those who do so make certain they adhere to either the “broker protocol” or their contractual obligations to the firm.
Because the specifics of each adviser’s circumstances are different, you’ll want to consult with an attorney versed in regulatory compliance issues prior to discussing a past or upcoming move with any client, in order 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 adviser changes firms. It was intended to ensure smoother transitions for advisers and prevent needless litigation.
The protocol outlines the specific client data that can be retained in a move and permits advisers to create a spreadsheet to bring with them and to use to solicit their clients following their transition. Thus, advisers 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 pertaining to retainment of client information and client solicitation. Typically, advisers 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 prohibited you from speaking about the move in advance. You will want to successfully communicate the benefits of changing firms and assure your clients their current level of service will be maintained.
With a knowledgeable attorney and thoughtful approach to the process from start to finish, you can execute a safe and successful transition.
Matt Durr is director of mergers and acquisitions at AdvisorLaw.