https://www.investmentwriting.com/newsite/wp-content/uploads/2016/12/investmentwriting_logo_2016.png 0 0 Susan Weiner, CFA https://www.investmentwriting.com/newsite/wp-content/uploads/2016/12/investmentwriting_logo_2016.png Susan Weiner, CFA2011-04-21 13:03:502022-11-15 10:10:55Reader question: How can I ask clients to follow me to a new firm?
Reader question: How can I ask clients to follow me to a new firm?
When financial planners, wealth managers, and portfolio managers change firms, they want their clients to follow them. But clients don’t fall in line as easily as ducklings following their mother.
After an advisor asked me for advice about composing a letter asking clients to switch firms, I created the list below.
- Your letter should be about your client first, then you and your new firm. I’d use “you” in the first sentence and focus on the benefits to your clients from your move. For example, “You’ve said you’re interested in a broader range of investments. You can choose from many more options when you follow me to my new firm, XXX Financial. The concerns expressed by clients like you are a big reason behind my move. At XXX Financial, you’ll benefit from…”
- Make it easy to switch. Do anything legally possible to make the change easy. If you can fill out the paperwork, so all they need to do is sign, then do it.
- Stress the benefits of continuity. It must be easier to continue working with the same advisor than to educate a new one from scratch. Stress these positives rather than criticizing your previous employer.
- Show that you know them well. No form letters, please. Personalize your letter, referring to things their new advisor at your old firm won’t know.
- Follow up with a phone call. Letters and emails are a great way to reach a large group of people quickly, but a phone call is more personal.
Readers, please help this advisor make the transition. Leave your suggestions as comments below.
Image courtesy of cj berry
Note: Updated on Nov. 15, 2022.
Hopefully this Advisor has already has a strong client relationship system in place with regular meetings and communications. This way it would be almost obvious for a client to make the decision to switch. Of course, the hassle factor for a client is always a hurdle we have to overcome Advisors. As you suggested, Susan, make it simple for your client to say yes. Put together a quick checklist of each step you need to do to transition a client. Hire a temp or enlist a financial planning student to help you get you through any tedious or administrative tasks. Explain to the clients how this will affect their portfolio/investment choices, how changes will be made to their investments, what the financial implication could be (taxes, etc). The bottomline is to answer any question they may have before they can ask. You may want to pick some of your “ideal” clients with whom you are close (and you know they will switch) and ask them for their input. Finally, remember the switch is a great time to weed out any of those clients you wish you had not “taken on.” You can always strategically transition them to an Advisor who may be a better fit.
Item #2 is huge! Years ago I was on a team that made the switch. Immediately after sending out notice letters, schedule as many in-person meetings as possible with your A and B clients with the paperwork in hand. Farm out the meetings to all of your client-facing staff so that you can spread out the load. Establish a well-coordinated system for preparing, submitting and tracking all of the necessary documents.
Kristin and Jennifer, thank you for your practical tips!
If the person asking clients to follow her to a new firm is in the United States, you must have advice of counsel. Of course, you will not ask anyone to follow you while you are still an employee of your previous firm. Further, in my jurisdiction, you may not “solicit” clients, especially in the immediate aftermath of leaving the previous firm. Otherwise, you can be accused of tortious interference with contractual relations and unfair competition. The best thing to do is to simply send a tasteful notice that you have joined the new firm, complete with your contact information. This can be followed up with a phone call (after you have joined the new firm) reiterating that you have joined the new firm. Curious clients can then ask questions which you may certainly answer.
This brings us to the question of how you ended up with phone numbers (or addresses, or whatever) if you didn’t take them with you. Of course, you didn’t take anything from your previous firm, including phone numbers, with you. However, for clients you have known a long time, you would certainly have their phone numbers memorized. In addition, most people’s addresses and/or phone numbers can be located from various online sites. Even if you know phone numbers by heart it is best to obtain all information (inclding misspellings) from these publicly available sites. Call ONLY the numbers listed from the publicly available sites (not the client’s personal cell phone that you have memorized – some jurisdictions suggest that what’s in your memory, if too extensive, could only have been obtained by deliberate memorizing in advance of leaving the firm). Many jurisdictions allow the client relationship manager to have client names and addresses on a personal Christmas list – but that, of course, would not include phone numbers.
The situation is complicated is you have an employment agreement with your previous employer. The terms of that agreement should be examined carefully by your attorney. If you are visiting with that person prior to leaving your previous employer be sure to meet him/her over lunch or after hours so it can’t be said you expended company time planning to leave.
The money you spend on competent counsel in advance of leaving your previous employer can save hundreds of thousands in legal costs when an angry, rabid ex-employer tries to use the legal system to slow you down. In larger firms, inhouse counsel generally decides whether or not to prosecute and inhouse counsel generally have cooler heads than line management. The same cannot be said for smaller firms, where an owner/manager may be willing to spend a lot of money to prove a point, particularly if the clients who are loyal to you represent a significant segment of his/her business. Be very careful. All of the above (and much, much more) happened to me. I did not have the financial wherewithal to go up against an ex-owner/manager with millions of dollars to spend on lawyers. This was ten years ago and I’m still paying the price.
Thank you for sharing! The legal angle sounds intimidating.
Here’s a comment from one of my LinkedIn Groups, which I’m sharing with the author’s permission.
Setting aside the contractual restrictions, the easiest is to ask the client! On average however, a CRM “takes” with him 15% of the AUM he is managing. This number is highly volatile and depends a lot on a couple of factors: the name of the firms (the one he is leaving and the one he is joining), the length of the relation with the client and whether the client was brought initially by the CRM or inherited.
About a letter (I would however meet clients before sending any letter), no criticism of the previous employer but an explanation on how the new one will better serve the client. But again, I would meet the client rather than sending a letter…
Thank you Susan. What I have found, from having my own FA in the past, is that IF they kept in touch during the year, for something other then them making money from me, I was more apt to move when they did.
If all they did were order takers, etc. then it was the company I was more interested in staying with.
It makes sense that clients with whom you have more of a relationship are more likely to stick with you.
Thank you for taking the time to comment!
I thought you might like to know that I recently bumped into the advisor who posed this question and received another heartfelt thank you for the help you provided.
There are many things to consider when switching firms – and clients need to be first on the list. If you are considering switching firms, you ought to read and re-read the Broker Protocol which lays out what can and can’t be said or done with regard to clients. Even if you are going to a non-Protocol firm, following those widely accepted guidelines is the best way to avoid a lawsuit by the firm you are leaving. Chances are if you have established deep relationships with your clients and have always acted in their best interest, the majority will want to follow you to your new firm.
Thanks for your addition to the conversation, Mindy!
I’m not sure Marla’s assessment in #4 is 100% accurate. A blanket statement suggesting advisors “may not solicit clients, especially in the immediate aftermath of leaving the previous firm.” may or may not be true. The decision on when and how to encourage former clients to follow you depends on what non compete and / or non solicitation agreements the advisor agreed to when they first began working for the firm they left. For example, after careful review I discovered an advisor who recently joined my RIA didn’t have a non compete / non solicitation clause in their contract. I’ll admit this is probably rare, but the point is broad sweeping statements can be misleading, and could discourage an advisor from a beneficial move to a new firm.
I definitely agree with Marla on the attorney; the best thing to do is hire an attorney specializing employment contracts, with a background in securities law. They can also help navigate the waters of the broker protocol, which in theory should offer greater protection.
In the end, I would add that advisors should be prepared to see some clients they thought for sure would follow them choose to stay at the previous firm. Despite what I thought were tight relationships, some previous clients of mine chose to stay. This disrupted my expected revenue at my new RIA and caused a bit of financial strain for my family.
Thank you for sharing your experience and your opinion on the legal angle. It does sound as if consulting an attorney as wise. Marla had commented on the situation in her jurisdiction. I imagine the law varies from place to place.
I agree with both Marla and Greg. While obviously the service and relationship aspects are key (as articulated both in the piece and the comments), there are constraints, whether embodied in a “covenant not to compete” clause in an employment agreement or not. And although I am not an attorney, I also believe that each state has its own laws relating to trade secrets (e.g., customer lists) and non-solicitation. An attorney must be consulted to determine the right course of action; one’s conscience must be consulted to determine the ethical things to do (or not do).
Herb, thanks for weighing in. I agree with the advice to be careful about the legal aspects of this issue. I hope that professionals will investigate their legal rights and responsibilities before they write their letters.