Most of you can easily tell a variation of this story: an advisor meets with a client or prospect who is nearing retirement–independence day for most Americans–but has woefully insufficient savings and is looking for "secret" strategies to rocket his way into a successful retirement.
Our firm helps breakaway brokers set up shop, and we receive analogous calls from woefully unprepared brokers on a weekly basis. They are advisors who left their wirehouse brokerage firm in search of greener pastures…their own independence day. But now the broker finds himself in a dire predicament.
I cannot finger why so many brokers forego the planning process before they break away. Many breakaway brokers spend more time designing a logo and picking out office furniture than they do planning their exit strategy.
During a recent transition of one such unprepared broker turning independent, he shared a scenario that drove home the point. One of his clients called him shortly after he was asked to leave his brokerage firm due to a premature revelation of his intentions. "You have spent the past 20 years extolling the virtues of good planning," said the client, "and you go create this business in such a manner that I don't think you believe your own rhetoric."
No matter how automated a financial planning process is, it never comes out of a box, and broker transitions are no different. A transition plan, like a financial plan, is dependent on the subjects' needs, goals, preferences, and resources, as well as their appetite for risk. Without personalized planning, a transition can go from a time to remember fondly to one that is tinged with regret. While every transition plan is different, there are a few "gotcha" categories that make this process different than opening a diner or a florist; namely brokerage and custody services, technology solutions, legal employment issues, and regulatory compliance.
Brokers need to first assess their employment situation–did they sign an employment agreement 14 years ago, or an annual certification they clicked through without thorough examination? Next, the broker should consider all applicable industry rules that apply based on his registration, including restrictions on outside business activities, private securities transactions, and selling away, to name just a few. Furthermore, broker/dealer policies and procedures, office politics, and overall reputation must also be considered. Finally, departing brokers must have a strong familiarity with applicable concepts of employment law.
Once these matters are laid out on the whiteboard, a broker can then consider the project requirements and develop a timeline and coordination of the project's deliverables.
