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What Steps Financial Advisors Should Take Before Severing Ties with Their Current Employer

Nearly half of financial advisors at big banks are thinking about severing ties with their employers over the next year and a half or so, as we’ve recently reported about an Aite Group study that found more than 45 percent of wirehouse brokers are increasingly interested in breaking away.

But making such a move is a lot easier said than done, according to Jodie Papike, executive vice president with independent broker-dealer advisor and executive placement firm Cross Search in Jamul, Calif.

For big bankers making a move, “The first thing you want to do is look at your contract,” Papike, whose firm likes to call itself a “concierge” to financial advisors in transition, tells eFinancialCareers.

Show it to an attorney at the firm where you’re headed or give it to your own lawyer if it’s someone who's really sharp and familiar with the industry, she adds. You want to know all the potential pitfalls if you're leaving the firm, for instance:

  • Is there a non-compete in place? Will your old firm try and put a restraining order on you or your new employer to keep you from talking to customers they consider their own clients? All of these questions should be considered.

  • Ask your attorney to find out if the firm you’re exiting has signed a recruiting protocol and if so, what rules you need to follow to comply.

Do You Owe Your Former Employer Money?

Another pressing issue for advice-givers in transition: Do they owe money to their former employer? Sign-on bonuses have been commonplace among many wirehouse brokers starting off at their firms during the past few years. "Frequently, those notes are seven, eight and nine years out,” says Papike.

These days, sign-on bonuses available to top producers with big books of business have advisors feeling freer about breaking prior retention agreements, but once again, it may be easier said than done.

Advisors who’ve now received a few years worth of their retention bonus may be legally bound to pay it back if they leave before their agreed-upon package is paid, and that is particularly likely among wirehouse breakaways who’d agreed to hang in for eight or nine years and have now decided that’s too long, says Papike. On the other hand, she says, “Independent [brokers] tend to get their bonuses right away with less structured, shorter term notes,” the staffing specialist says.

Beyond that, transitioning brokers need to be careful with their planning.

Evaluate the New Firm's Processes

As she told Investment News, advisors who are considering a move need to evaluate the new firm's processes and interview their transition teams to assess competence and expertise.

Make sure, too, to speak to advisors who recently have moved about the team's accessibility and follow through. Make sure the transition team is one that has taken on wirehouse brokers before.

“A solid transition team should be able to provide you with a detailed plan that maps out a four- to six-week timeline, detailing what you should be doing at every step,” says Papike.

Best Time to Pull the Trigger

Don’t forget to think about when might be the best time to pull the trigger, she adds. Announcing your departure right before a three-day weekend may give you extra time to contact and talk to clients, assuming your contract allows it. If it says you can’t solicit existing clients, your attorney may instruct you to do no more than send them an announcement letter telling them where you are headed. Otherwise, plan in advance so you’ll be able to contact and meet as many of your top customers as possible in as short a period as possible once you’ve announced your intentions to move on.

Preparation is the Key

“Preparation is key if you want to organize your clients and decide who you want to get in front of,” says Papike. Some advisors may also choose to send DVDs to those clients who they aren't able to reach personally, to explain your decision and how the process will work for them. You can also have a client appreciation event to coincide with your move so that you may personally thank them for sticking with you while giving them a forum to ask questions and sign paperwork. Again, be sure to check with your attorney before making any commitments along these lines.

AUTHORJanet Aschkenasy Insider Comment

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