There's a lot to be said about transferring assets under management — and some of it ain't pretty.
The Good
Today, if you're a traditional broker who sells stocks, bonds and mutual funds, you're truly in the catbird seat when it comes to transporting client assets.
There are virtually no operational impediments to bringing your book elsewhere.
The ACATS system automatically transfers stock positions and bond holdings. Margin accounts move with no effort required either by the broker or the client. The new firm simply pays off the old balance and sets up a new account.
There may be some unique house rules for margin on concentrated positions or low-priced stock, so these accounts need to be reviewed in advance. The ease of transporting this type of business makes the stock or bond jockey able to hit the bid elsewhere with few complications.
Firms all have selling agreements with major mutual fund companies, so there are rarely any issues here. There are far fewer in-house funds these days. Advisors generally don't sell proprietary funds unless their performance is exceptional, so mutual fund portability is usually not an issue.
In some cases wirehouse executives have actually set things up to allow their funds to be moved to other firms; they don't want loose assets if the departing broker takes his clients out of the funds, and they want to avoid the reputational damage of client disputes.
One caveat: Advisors should check 12 -1 fee policies, as firms may differ on how these fees are shared amongst firm, broker and client. It appears that regulators at some point may disallow these fees, so this concern could soon become moot.
Insurance and annuities are a simple open-and-shut case. Advisors need to check in advance to find out if the prospective firm has selling agreements with their insurance companies and that these agreements cover the specific products they sell.
Broker as Portfolio Manager Accounts deserve the Five-Star Travel Award.The mix of stocks, bonds, ETF's and funds are hassle free to move.
The Not As Good
Moving retail separately managed accounts can make you feel like you've got sticky gum on the bottom of your shoe. You'd like to say goodbye to the old firm, but they just won't let you make a clean break!
Unless the new firm has the exact same portfolios available, you'll need to either consider setting up a dual- contract relationship with the manager or find another manager in the same asset class.
Asset managers usually have higher minimums and charge higher fees to clients in dual-contract programs. Unless the amount of assets that you're bringing is quite significant, money-management firms are not likely to be interested in the expense of setting up a special "one-off "contract.
We find that advisors in this situation typically choose new SMA managers and then work to minimize adverse tax consequences to clients. Fortunately, there is considerable overlap amongst SMA managers at major wirehouses. It's largely a game with the same 25 or so players.
