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An Ounce Of Prevention - 10 Tips For Advisors

SuperUser Account posted on March 01, 2013


 Moving your practice can be overwhelming. There is a lot that can go wrong because there are many moving parts. When you are working in an industry where a license is required, non-competes are common, competition is abundant and there is a potentially big payoff, things can go wrong quickly. Here at the Rummage Group, we often see advisors only after they have made a bad move-which usually could have been avoided. Here is our ounce of prevention in 10 easy steps.


I am not an attorney, so you should seek legal counsel regarding a non-compete/solicit. But the bottom line is that these agreements generally work well because they scare people into submission. There are questions regarding whether non-compete agreements are legally binding and there is no simple answer. It varies from case to case, and can depend on state law and the restrictiveness of the agreement, not to mention what the employer construes as competition.


Most firms do not want to spend the time, effort or money to truly enforce the agreement. Many have become so accustomed to the new employer writing them a check that it's often what they seek. Many firms will just send two or three threatening letters and then you will never hear from them again.

A few tips: Don't put anything in writing to a client regarding your move prior to or immediately following it. Do not print anything regarding your clients prior to the move. (You should keep a handwritten Rolodex of your clients and any pertinent information.) And don't discuss anything you happen to have in your possession with the hiring manager.


When a manager finds out an advisor is looking at other firms, the advisor is sometimes fired on the spot. Unfortunately for some, they don't have printed proof of production or assets. All firms want verification of an advisor's previous 12 months. If you don't have these numbers and you are fired for any reason, your offer from the new firm will drop significantly..


Firms want you to buy products that are difficult or impossible to move. Buying proprietary products is one of the most foolish things an advisor can do. It puts them in a precarious situation when asking their clients to move their assets to the new firm. An advisor should only buy products that are common to most firms.


Everyone in wealth management knows that fee-based business is high priority. When you move your book to a new firm, it is less stressful to have a portion of your book throwing off annual fees. If you are putting 100% of your clients in an annuity or "A" share mutual fund, you'll find it more difficult moving your practice. Whether you are in the fee-based or transaction camp, it is smart to have some assets that provide you with income.

Moving your book is the name of the game and it's all about the relationship. If your clients like you and feel you add value to their financial lives, they will usually move with you. If not, they won't; end of story. Take the time to build strong personal relationships with your clients.


Don't just guess which clients will move with you. Make a list and sort them into "A" clients, those you're certain will move; "B," those you think will move; "C," those who are a total question mark; and "D", those who are not likely to move with you or the ones you'd like to jettison. Next, assume a moving rate of 80% of A's, 50% of B's, 20% of C's and 10% of D's. An advisor is only as good as his/her book. If your clients won't move with you they are not your clients, but rather customers.


It's hard to keep a secret, but telling anyone about your move other than your spouse or a consultant is a big mistake. This information puts everyone at great risk. The chances of your friend keeping it a secret are low.


It's never a good idea to tell a client about your change. However, you may feel if you don't, they will be insulted and therefore not want to move with you. There are ways to hint to your better clients, but be very cautious. At no point should you tell the client you are definitely moving or name any other firms. This again puts everyone in a bad situation. If you were to come out and tell your clients, it only takes one of them to panic and call your employer to ask what will happen to them when you leave the firm.


There is an old saying in this industry that advisors change firms for the money and justify it with facts. I don't entirely agree with this. Most people are complacent and afraid of change. They will tolerate a situation until the pain becomes too great and at that point they will make a change. Getting a transition package is important because it takes some of the risk out of a move. Weigh your options. Look at several models. You don't want to commit career suicide. There are over 1,000 firms and 10 models that employ advisors. The easiest way to negotiate a better deal is to honestly tell the hiring manager you have other offers on the table. It is easier for a firm to match an offer than to just give you more because you think you deserve it. Firms already feel they are giving you too much and you may look greedy asking for more. This has irritated managers in the past who have just walked away-shocking the candidate.


If you are doing this alone, you should spend at least 100 hours researching all your options, so you don't end up at a firm that does not meet your needs. Many advisors end up in another bad situation because they based the move on what the hiring manager or a friend told them. Unbiased information is what you need.


After a divorce, many individuals say, "This is the last time I am getting married." Likewise, many advisors changing firms feel this is their last move. Since they will never move again they make the same mistakes as the past. Be realistic and assume you will be moving again at some point in your future. Since firms are always changing without your permission or consent, eventually the pain at your new firm may become too great.


Manage your practice better this time around and you will be around for a long time.


Rick Rummage is the founder and CEO of the Rummage Group. He can be reached at