Broker Check

Ask Yourself: Why Wouldn’t My Clients Move with Me?

| May 24, 2019

Independent financial advisors want to share a little secret with like-minded colleagues thinking about setting up their own practice. More than 90 percent of your clients, if not all of them, will almost certainly move with you within the first six months. But there is a catch. Your clients will come along because you treat them well in your present situation and because your new independent partner has an excellent system for making the transition easy.

Concerns about client retention top the list of topics for prospective independent advisors. An article on reported “The rule of thumb is that anywhere from 60 percent to 90 percent of clients stick with an advisor when he or she moves to a new firm.”

At Cutter & Company, an independent Broker-dealer and Registered Investment advisor with a track record of more than 30 years shows the following “as typical outcome of our financial advisor” client transition rates:
• 85 percent of a newly independent financial advisor’s clients will transition within 90 days.
• The remaining five to 15 percent will transition during the subsequent three months.

The firm enlists data the broker can legally provide about their current clients and systematically prepares all the paperwork required for client transition.

“Not all transitions are this successful.”

The advisor needs to thoroughly consider the type of relationship they have with their clients. Does the client have a personal bond with the Financial Advisor or are they primarily a customer of the old firm? An essential part of the due diligence involved when considering becoming independent involves:
• Gauging the strength of client relationships
• Tracking the regularity of contact with clients
• The depth of knowledge about individual clients’ personal and financial issues

Financial Advisors who score well on those measures are likely to have a very high percentage of clients transition with them to their independent practice.

When the time comes to make the transition, financial advisors will want to have direct conversations with their clients explaining the reasons they have decided to become independent. Those reasons will very often include client benefits like the freedom to offer products they really need with service that’s potentially better than they experienced before. Clients need to be reassured that they enjoy a genuine relationship with their Financial Advisor; that they don’t simply represent a sale but are truly a valued client.

The most successful transitions to independence are often made by Financial Advisors who have done their homework thoroughly. They will have determined the independent firm they join will offer extensive experience, flexible business model options, putting the financial advisor in control, and solid, effective client transition systems. They will also have concluded that they have earned client trust, exhibited by solid relationships and astute counsel through the ups and downs of financial market cycles over time. At the end of the analysis, potential independent Financial Advisors should be asking themselves this question: “Why wouldn’t my clients come along”?

HTTP://WWW.WEALTHMANAGEMENT.COM – Going Independent Without the Headaches – January 1, 2009
HTTP://WWW.WEALTHMANAGEMENT.COM – If you Go Indie, Will Clients Follow? The Great Leap of Faith – May 27, 2014