There’s an art and a science to handling financial advisor transitions successfully and efficiently.
Gone are the days of needing mountains of paperwork and the patience of a saint to move from one institution to another.
As a wealth management firm looking to grow by adding more advisors, whether you are a broker-dealer, independent firm, or even an RIA, here is everything you need to know about financial advisor transitions.
Tech Support for Breakaway Advisors
Instilling confidence in your new advisors that you can help them retain as much of their book of business during a transition starts with having the right technology support.
Enabling Advisors and Clients
Digital enablement used to mean putting forms on a website for clients to download instead of sending them in the mail. Then it transitioned to allow for those digital forms to be completed on a computer. In today’s digital world, however, the role of technology in your client experience has changed. Those forms should now be turned into a simple user interface that guides clients through the process and removes the need for any paper.
This straight-through processing allows for less manual work on the advisor’s end as well. No more uploading documents to a custodian and wondering if you have missed a document.
Instead, providing a full end-to-end software experience helps guide advisors every step of the way, just like the clients. This speeds up trading and new account opening and adds trust in your firm for both the client and the advisor.
Your entire organization also benefits from this digital experience in three big ways:
- Enhancing the Back Office: Beyond your new advisors and their clients, your front and back-office operations will benefit from enhanced digital workflows. You rely heavily on your back office to keep things running smoothly with data entry and management as well as account transitions. This digital enablement will increase the back office’s efficiency by cutting down on the need for time-consuming, back-and-forth communication with the front office. That means more productivity for everyone.
- Tracking ROI: With an enterprise advisor transitions platform, your firm can easily track the ROI of your new advisors. At-a-glance dashboards give your executives oversight and transparency into the entire account transfer process in order to know where to reallocate resources and keep things moving.
- Connecting the Broader Ecosystem: Like most firms, you are likely using multiple technology solutions. Digitizing the transition process allows you to integrate that data with your broader ecosystem of applications and vendors. Syncing that data further simplifies transition and everyday processes.
Top Tech Considerations
The digital enablement of your breakaway advisors starts with having the right tech in place. This has been especially important since the digital shift created by the COVID-19 pandemic. According to a Fidelity study, two-thirds of advisors think digitally innovative firms have become more attractive during the pandemic.
Here are the top tech considerations that will help make a transition seamless for both advisors and investors:
- Keep Your Focus
Start by identifying the tech your firm needs, which can be broken down into two main categories:
- Advisor Experience
- Types of solutions: CRM, portfolio accounting, trading, billing, reporting, and analytics
- Special considerations: Look at cloud-based technology for remote capabilities and check for integrations that will connect the different solutions
- Client Experience
- Types of solutions: Client portal, website, and other digital touchpoints
- Special considerations: Prioritize tools that offer engaging virtual connections with your clients and are also easy to use and enable personalization
- Keep it Simple
About half of independent financial advisors use an all-in-one technology, and there is a reason why having a fully integrated solution is so popular. When your different systems don’t talk to one another, it creates a lot of inefficiencies in your tech stack, which can completely wipe out a lot of the benefits of using those products in the first place. By keeping things simple and within the same ecosystem, you can streamline tasks and workflows.
- Keep an Open Mind
Selecting and implementing new technology by committee is usually a very tedious, lengthy and stressful process. Instead of banging your head against the wall, take an open architecture approach to your tech stack.
This means considering new solutions advisors bring to you that can address your firm’s unique challenges and opportunities and help you build a truly customized tech stack. Just be sure to keep an eye on the future and choose solutions that can grow with you long term.
Ultimately, firms that embrace technology and effectively implement and utilize it will grow faster than those that struggle with adoption.
M&A Activity: Recent Trends and What To Expect
Digital enablement is increasingly important as more wealth management firms look to grow through mergers and acquisitions. During the last quarter of 2020, there was a 25% increase in M&A over the previous quarter in the year prior, and even more activity is expected in 2021.
With M&A activity trending, acquiring advisory firms and the RIA sellers both need to understand what’s happening. For sellers, they need to keep an open mind when it comes to acquisitions as a means of growth or as an exit strategy or road to retirement. For the buyers, looking to grow inorganically means you need to stand out in a crowded field as the top choice for a seller.
This is where technology comes in. An acquiring firm needs a cohesive, integration-friendly tech stack that makes it easy for the RIA to transition their book of business. The key is ensuring the process is easy for clients. Otherwise, the acquiring firm and transitioning RIA risk losing clients to other firms.
RIAs have multiple options for the next move for their business, so make the decision on which firm to join easy. And, in turn, the digitization of the transition will enable scale for the acquiring firm without needing to add headcount or onboard more advisory firms.
Managing Risk: Data Sharing during Advisor Transitions
Risk and data management are two of the most important parts of financial advisor transitions.
For breakaway advisors wanting to leave their broker-dealer to join a new firm, the success of that transition rides on having access to their previous clients’ data. But there are regulatory considerations for the advisor and their new firm to follow when collecting and using that client data.
The Broker Protocol
The Broker Protocol is a standard set of rules created to address issues related to data and avoid any legal skirmishes. The Protocol outlines what client data a breakaway advisor can keep and when they can start contacting clients.
An advisor can only retain Client Name, Address, Email, Phone Number, and Account Tiles, and they have to wait to inform clients of their move until after the break in employment has already happened.
Keep in mind not all firms are members of the Broker Protocol and an advisor could have additional employment agreements with their old firm that could limit contact with their clients or other parts of their transition.
Limiting Risk
Calling the transition for breakaway advisors a time of stress is an understatement. Providing advisors whatever support they need in order to bring as many clients with them as possible is key alongside limiting risk. Technology can ease the process for everyone involved.
Filling out paperwork and submitting forms manually leaves too many chances for mistakes and, even worse, too much frustration for a client. Even just a small hassle of re-doing forms can be enough for a client to decide to stay with the old firm.
Instead, arm new advisors with technology that removes tedious work for both your advisors and their clients, as well as allows for easy collaboration and communication between all parties. This digitization keeps client data secure and safe and helps build and/or keep trust between advisor and investor.
Simplify Client Retention
Advisors are often there for clients as they experience several of life’s biggest milestones, from buying their first home and building a college fund to retirement and estate planning. And, yet, an average of nearly 20% of client assets choose not to follow their advisor to a new firm.
In order to retain as many clients as possible during a financial advisor transition, there are three main considerations to make the process legally and financially smooth:
1. Keep Communication Open
Because Broker Protocol allows a breakaway advisor to take just a small amount of information and restricts contact to only after the advisor leaves their old firm, the level and quality of communication with clients is very important. Winning over clients means being the best at communicating this change to clients. Zero in on explaining how and why this transition will help service the client better. Forget all the numbers and facts. Instead, focus on the relationship.
2. Prepare for the Big Questions
Breakaway advisors may have just one shot at convincing a client to stay with them during a transition. Be prepared and have a template laid out for the conversations ahead of time. Here are some of the bigger questions clients may ask:
- Why are you leaving the firm?
- Why should they remain as your client?
- What does the transition process look like?
- What’s the next step?
3. Leverage Technology
The COVID-19 pandemic forced everyone, including your clients, to embrace technology more fully. They will likely expect a digital transition experience. Gauge their comfort level and also walk them through what this process will look like: How many emails can they expect? What forms will need to be filled out? How do they submit information to you? Don’t be afraid to tout the benefits of less paperwork and quicker onboarding.
In the end, you want a smooth, simplified process that will give them further confidence that sticking with you is the best choice.
Training New Advisors
Sink or swim. It’s a catchy saying but definitely not the best way to onboard new advisors. For advisors to succeed and stay long-term, training needs to be effective and efficient.
The Mission
Start with the “why” behind your firm. Knowing the mission helps inform the work. For example, your firm exists to help clients put strategy behind reaching their financial goals—not just to help them make healthy returns. This idea of putting values over benefits will make a bigger and longer-lasting impact and help new advisors understand the culture and their role in it before they sit in front of a computer.
The Work
Of course, helping them learn the technology is also a big part of successful onboarding. Learning new programs and software is a big part of any new hire training, and breakaway advisors are no different.
They will need to learn all of your internal company tech: systems for tracking tasks, creating client reports, comparing financial plans, and project management. On top of that, they will need to learn how to use your firm’s client technology.
How you train your new advisors can make or break the transition for them. According to Cerulli, 75% of advisors changing firms said learning new technology was their top anticipated challenge.
Ensuring an overall positive onboarding experience will instill confidence and even loyalty.
Skience Advisor Transitions
Skience has brought financial advisor transitions into the modern age with a fully unified Advisor Transition Solution that digitizes the entire process.
It starts with giving advisors the ability to upload the information they can legally collect based on the Broker Protocol into Skience. An advisor and their new firm can then customize emails, set up a micro-website, and create a fully digital transition workflow for clients.
From there, clients use the modern, easy-to-understand tools to complete the entire account transition process in just a few minutes. And throughout the entire process, advisors can keep an eye on all client interactions, including seeing who has opened an email and who has finished the questionnaire. Advisors finish out the account application from there and collect signatures via DocuSign.
Skience, winner of the 2020 WealthManagement.com award for Client Onboarding/New Account Opening Solution, empowers firms to confidently bring in more advisors and onboard clients faster — regardless of their tech stack.
Schedule a demo to see this scalable, streamlined experience for yourself.