Let’s consider three hypothetical scenarios, any of which could be in place during a time when an experienced financial advisor is considering setting up an independent practice.
- The stock and bond markets are essentially flat, with no significant swings up or down in major indices for the most recent two quarters
- The broad market is on a tear, increasing by an average of 15 percent in the past six months
- Market volatility is high, with the Dow Jones Industrial average just as likely to be up or down two-four percentage points on any given day over the last half year
So when is the best time to actually make the move to start an independent financial services business, which will set the advisor on course to greater professional fulfillment and customer satisfaction? The answer is: None of the Above.
No Time Like the Present
The reality is that no potential market or economic situation is more ideal than any other for setting up a new financial practice. For advisors whose client base is primarily focused on long term investing, it does not matter what the market is doing for the handful of days when their assets will be transferred to a new brokerage account.
Some advisors who have decided to make the transition, however, may believe market volatility presents a timing problem. They may wonder about sending a potentially negative signal to the very clients they want to bring over to the new business. But the best financial advisors are speaking with their clients on a regular basis, especially when markets are rocky.
It can be comforting to clients to know the advisor is thinking about them. The conversation is also an opportunity to bring up the idea that the advisor is considering making a business change; to build an independent practice of their own which will bring greater flexibility and service levels for the clients as well.
Account Transfers Streamlined
Another concern about making a move, when a market is topsy-turvy or when it is riding a virtual hockey stick upward, is about getting accounts hung up in transfer limbo. In years past that may have been a concern, when there was essentially no time line in place for transfers to occur. Later a seven-day timeline was introduced. But now a brokerage account to brokerage account transfer takes place under a shortened regulatory timeline. That is the same as the trade date to settlement date period, once the receiving firm has accepted the account for transfer. Trades take place over three business days. If one absolutely needs to be executed at transfer time, most firms will allow the trade pending arrival of the assets.
There are many well-documented reasons for financial advisors to set up their own practice. And there is no better or worse overall market situation in which to make the move. In our experience, brokers who have good ongoing conversations and solid relationships with their clients will have a greater than 90 percent chance of bringing those clients over to the new business, regardless of what is happening in the market. Moreover, the client may even be happy that the financial advisor, who has taken good care of them over the years, is venturing into their own business.
Contact Cutter & Company today if you would like to explore the possibilities. You can also download a Guide to Independence by clicking here and we’ll also send you some potential expenses that sometimes are not discussed when speaking with a potential new firm: “5 Unexpected Expenses – Who Would Think You Had to Ask?”