A smooth advisor transition to your firm starts well before the actual process begins, and there’s a lot of details that go into making each one successful.
One of the most essential parts to an advisor transition is the one that is likely thought of as the least enjoyable part of the process. Yes, we’re talking about compliance.
If you know what to expect, though, compliant advisor transitions can be easy to manage and you’ll be on your way to smoothly onboarding each and every new advisor – and hopefully, many of their clients too.
Considerations for Creating a Compliant Advisor Transition Program
These are the primary regulatory requirements you, and your advisors, need to understand about transitioning.
Broker Protocol
If you’re a broker-dealer or you’re onboarding an advisor leaving a broker-dealer, you need to be especially aware of the Broker Protocol and if any firms involved in the transition are a part of it.
In short, Broker Protocol details what information a transitioning advisor can bring with them about their clients. In technical terms, a client relationship is owned by a broker-dealer and not an advisor, so taking client information is tantamount to stealing data.
The Broker Protocol agreement states that advisors can take this information:
- Client Name
- Address
- Phone Number
- Account Titles
That’s all you have to go on. Any more, and you’re running afoul of running a compliant advisor transition.
If the advisor you’re onboarding has worked to develop strong relationships with clients, though, that limited information hopefully won’t be a deterrent to bringing most of their book of business onto your platform.
Marketing and Advertising Program
The Broker Protocol requirements that dictate how clients can be contacted by a transitioning advisor touch on the ability of an advisor to bring their existing business with them.
What they don’t do, however, is dictate any marketing and sales efforts that a new advisor can engage in once they join your firm.
Your firm may offer robust marketing support for your advisors — including a marketing technology suite and best practices for client communication. Or, your firm may not have such a standardized set of rules for engaging new prospects for each advisor.
Whatever your firm does, it’s necessary for you to educate your advisors on the expectations and what guidelines they need to follow for communication. The SEC has opened up new avenues for marketing, but also made it more difficult to explain to advisors on what is and isn’t allowed, by passing the updated Marketing Rule.
The Marketing Rule opens up client testimonials for advisors for the first time. Many financial institutions with a large number of advisors are choosing to take the blanket approach of not allowing testimonials to avoid running afoul of any SEC auditors.
However, if you’re taking the leap into brave new marketing territory, educating new (and old) advisors about staying compliant with their messaging is essential.
Compliance Program Effectiveness
The last piece of creating compliant advisor transitions is to have your firm’s compliance program updated, understood, and communicate to onboarding advisors.
A compliance program is only as effective as your advisors’ ability to follow it, and if it’s overly complex or under-communicated, you’re setting your new advisors up for failure — either now, or in the future.
One of the simplest ways to implement your compliance program is to have a technology suite that contains the necessary workflows and tools, so you can remove the need to rely on manual processes and an individual advisor’s memory.
With integrated business workflows, you can know that all the steps in an advisor transition are covered so there’s no guessing on who needs to be involved at any given step.
Get the Complete Guide to Financial Advisor Transitions
Still need to learn more about creating a compliant advisor transition program in your firm?
The Complete Guide to Financial Advisor Transitions offers practical insights into:
- M&A trends
- Tech stack considerations
- Broker Protocol
- Client retention
- Onboarding new advisors
- Client experience
Click here to get your copy and read it now.
The Skience Transitions solution is developed for the post U-5 environment that outlines acceptable data to be transferred. With the right technology in place, your firm and advisors can experience faster transitions, cleaner data and mitigate risks. Book a demo to learn more.