The world runs on data.
Google largely rose to prominence on its ability to collect its users’ data, anonymize it, and then sell it back to advertisers.
Even though they’re ending the use of cookies in targeted advertisements, the world has realized the power of personalized and tailored user experiences. To generate this personalization, you need enough data to know who they are and what content they are most likely to engage with.
That type of approach to data isn’t all that different in wealth management. When a breakaway advisor wants to leave their broker-dealer and join a new firm (or even start their own), having access to their previous clients’ data can be a make-or-break moment.
Just like there are now domestic and international rules governing the types of data that an online advertiser can store, financial advisors leaving a broker-dealer also have to live under the data rules established by the Broker Protocol.
We’ll look at the regulatory considerations a breakaway advisor and their new firm have to know when collecting and using investor data.
The Types of Data Governed by Broker Protocol
An advisor transitioning from one firm to another has a relatively simple mandate for client data. Take only what’s prescribed by Broker Protocol, and nothing more.
Broker Protocol was originally created to address a few key issues related to data and the issues it can cause.
For advisor representatives, Broker Protocol attempts to level the playing field and do away with common legal skirmishes. It wasn’t uncommon for restraining orders to be filed against advisors moving or for some institutions to claim more client data ownership than others.
The Protocol gave those in the profession a reference point that would attempt to get every firm to agree to a standard set of rules about treating client data whenever an advisor transitioned to a new role.
For investors, the other stated aim of Broker Protocol was to give clients greater privacy rights. In a world where data sharing between companies is increasingly being scrutinized, it doesn’t seem like a bad idea to limit the amount of consumer information that can be retained and copied over to a new company without a client’s express consent.
An important note: Not all firms are members of Broker Protocol. An advisor’s previous firm may also have additional employment agreements that could stipulate other limitations on their ability to engage with clients or establish themselves with a competing business. Those issues are best resolved with an attorney by your firm’s side.
Unique considerations aside, Broker Protocol says that an advisor transitioning to a new firm can save and retain the following client information: Client Name, Address, Email, Phone Number, and Account Titles.
It’s not very much, but it’s enough to go on—especially if the advisor has had a successful and trusting relationship with clients that goes deeper than simply which employer’s name is on their business card.
When to Start Contacting Clients
There’s no way to guarantee success when an advisor transitions to a new firm, but giving them the support they need to bring as many clients as possible with them is as sure an indicator as any.
Importantly, advisors cannot contact clients to inform them that they’re leaving their current employer until after the break in employment has already happened.
At this point, there’s a lot going on for an advisor making a transition. In addition to managing contact with (now previous) clients, advisors also need to keep an eye on what their previous firm puts on Form U5, which records the reasons for their termination of employment.
It can be a stressful time for even the best advisors. And that’s where technology comes in to play a role in helping to streamline the process of re-papering clients and smoothing out the transition.
The Role of Technology in Limiting Risk for Breakaway Advisors
Financial institutions are well acquainted with risk management. It’s one of the major building blocks of the entire industry as advisors help investors manage investments with the right balance of exposure and allocation mix.
From a business perspective, helping an advisor transition without problems is also a risk management process. Thankfully, technology advances assist firms in equipping their new advisors with the right set of tools to make transitioning clients a simpler event.
Recent survey findings support the need for technology that’s seen as a solution by advisors instead of an impediment to their success. Cerulli found that 75% of advisors changing firms said learning new technology was their top anticipated challenge.
But even worse than learning new technology is having no technology to lean on for support at all. For much of the industry, filling out paperwork and submitting account transfer forms is still a labor-intensive process that feels stuck in the 90s.
A manual re-papering process leaves too much to chance. Forms can be filled out incorrectly, the wrong form can be filed, or other delays can leave clients frustrated. Sometimes, that frustration can even be enough for a client to decide to stay with their old firm.
And when an average of nearly 20% of client assets choose not to follow their advisor to a new firm, every step of the process has to be carefully crafted to ease clients’ worries and give them an experience that’s immediately better than the one they’ve been used to getting.
Losing clients because of subpar technology or cumbersome processes are most frustrating because they’re entirely avoidable. And eliminating those kinds of frustrating events is what advisor transition technology can do.
The Skience Advisor Transitions solution removes manual processes from account re-papering to help advisors collaborate and communicate with clients on a personal level without missing any details.
You can give your new advisors guided workflows to keep them in step with clients throughout each phase of re-papering, and real-time validation checks effectively make NIGOs a thing of the past.
Are you ready to help your advisors transition more clients to your firm? Click here to make it easy with the Skience Advisor Transition platform.