Planning to leave your firm but worried about the process of transitioning?
You’re not alone.
60% of Advisors say they have put off their transition because they “fear of the unknown”, with concerns about client attrition and the scale of administrative duties making the process feel too challenging for many.
But it doesn’t have to be this way.
There are a series of proven steps you can take to make the process simpler and more successful – and this article reveals them all. Whether you are joining a new firm or starting your own, setting aside six months to organize your client data will enable you to hand in your notice with confidence – knowing that everything is in place for a seamless transition.
Six Steps to Prepare Your Client Data for Transition
1. Check Your Employment Agreement
The first step to transitioning is to extract client data, but first you need to have a lawyer check your employment agreement. Can you legally download copies of your client’s financial plans? Are you allowed to export client data from the CRM? And do you have to disclose what you’re doing?
There are two broad possibilities:
- The best-case scenario: You have no obligations and can leave freely whenever you want. While you will still need to notify your current firm and agree on when your last day will be, there will typically not be any restrictions around what information you can take with you on the way out.
- The worst-case scenario: You are contracted to take a 30-day “garden leave”, during which time you are not allowed to contact clients or ask them to join your new firm.
It is important to have plans in place for both the best and worst-case scenarios. This could save you a lot of legal trouble: if your firm owns the data and compliance notices you are illegally extracting information from the CRM, they could start monitoring your activity and ultimately prepare a nasty lawsuit.
2. Get Familiar with Your Tech Stack
The ideal outcome of your transition would be to seamlessly switch your client data into your new tech stack. But to make that a reality, you must become familiar with that tech stack and assess how the data will transfer – which can take some time.
We recommend you start by identifying the system you will be using – whether it’s proprietary tech from your new firm or a solution you chose for yourself. This will give you plenty of time to learn how it works and assess its interoperability with other software. However, even moving data within the same software can cause friction and not allow a complete transfer.
For example, let’s say you have a financial planning software license with your current firm and intend on using the same financial planning software at your new firm. Your current license might be owned by your current firm, or it might be a customized license that offers fewer features than a traditional license; you’ll want to check with each software vendor.
In some instances, the vendor will offer services, for a fee, to help you recreate each financial plan. As for portfolio management and reporting software, if you are moving to a new vendor, expect the process of retrieving or recreating all your old performance data to be clunky and in some cases, simply not worth the attempt.
Remember that the firm you are joining should be able to help you with these conversations and in many cases will also pick up the cost associated with transferring data.
You will need to ascertain:
- What software you plan to keep or change
- What data is and isn’t transferrable given your contract and the vendors you are dealing with
- How and who will transfer the data to the new system
- What support is available, if you are moving to a new firm or using a transitioning support service
- When you will transfer data and how long it will take
This should all be stored in a checklist that enables you to plan and execute the transition as smoothly as possible.
3. Gather Your Spreadsheets
Once you have the all-clear to extract data, you will need the following data compiled into a master spreadsheet:
- Client demographic data: Your clients’ names, household info, birthdates, addresses, emails, phone numbers, social security numbers, etc.
- Client account data: All your clients’ accounts, including registration types and beneficiary information. It is also important to have your clients’ asset allocation, tax budgets, etc.
You will likely derive all this information from two primary sources: your CRM and the custodian. If you are moving to a firm that provides transition services and support, they will likely provide the configured spreadsheets for you so that you don’t need to worry about creating them yourself.
Important to note: Take this opportunity to rigorously inspect the data for gaps or errors. Even a single typo on an email address, such as “.con”, can cause significant delays during the transition process – and will be much harder to identify later in the process.
Now, unfortunately, there are some instances where you will not be able to take client data with you, specifically when you are leaving a captive firm. In those instances, you will want to consult with an attorney on your rights:
- Are you allowed to publicly source client information?
- Are you allowed to simply promote on social media that you have left your firm and provide generic contact information so clients can contact you?
There are other instances where you may be leaving a firm that adheres to a policy called Broker Protocol, which dictates that advisors leaving are only allowed to take a few key pieces of client data with them, typically the clients’ names, addresses and telephone numbers.
4. Prioritize Your Households
You cannot feasibly transition all clients simultaneously, which means you need to prioritize how you will contact clients and move accounts. Organize your client account spreadsheet into three categories:
1st tier: The most valued and important clients
2nd tier: Important clients but not as important as your top
3rd tier: The people you are either certain will follow you when transitioning, or you do not want to bring to your new firm
This list will help you and/or your transition team stay organized around who will be personally contacted and will receive paperwork, immediately on the first day, and then on the days that follow. This is especially important if your contract with your former states that you cannot contact clients before the transition date or end-of-garden leave date.
5. Optimize Your Book
The next step is to plan how you will charge clients at your new firm. Enlist the help of the firm you are joining to do this analysis. Create two columns in a spreadsheet:
- Current fees: What your clients are currently being charged
- New fees: What your clients would pay if you moved them to a new fee schedule (either your firm’s recommended schedule or one that you introduce on your own)
This is a big opportunity for advisors transitioning away from captive institutions, b/ds or hybrids. Firms often have large mandatory platform fees that are tacked on to an advisor’s fee. As a result of the transition, there might be an opportunity to actually reduce client fees and still generate the same or more revenue; equally, you might be able to keep fees where they are but generate additional revenue.
Advisors also should never shy away from increasing fees after a transition if there is solid justification for it. For example, you might have been undercharging previously and will now be adding a lot of resources and capabilities that you didn’t have access to before. Either way, getting a sense of where you are now and where you could be post-transition will help set you up for long-term success.
6. Prepare Your Communications
The final step is to prepare messaging templates for your transition announcement. Advisors should not be drafting emails the night before their transition; these messages should be planned and optimized in advance.
Once you leave, you should:
- Send a mass communication to all clients explaining that you have left your firm, the new firm you are joining and what they should expect over the coming days. (You will want to be careful if you are maintaining a broker-dealer affiliation. B/ds have their own guidelines and rules; in some cases, they will not approve the use of common marketing communication tools like Hubspot.) Some advisors choose to embed a pre-recorded video or voice note in the communication, explaining the reason for the change.
- Reach out to individual clients letting them know about the change and setting expectations about what will happen if and once they agree to come along.
- Deliver a templated email to each client once they agree to join you. This should explain that they will be receiving an email from your contract management system such as Docusign in the next few days, and what they should do as the next steps.
This is your opportunity to “control the narrative” and show clients the benefits of following you. Focus on factors such as better and more robust resources and services, fewer restrictions from your firm and more frequent communication – all of which will increase clients’ trust.
Find the Best Path to Independence for Your Practice
Financial advisors that follow these steps have dramatically increased their client retention and reduced the stress of transition. But there is another key part of the puzzle: choosing exactly which RIA model you transition to.
That’s why we created A Straightforward Guide to Choosing an RIA. It condenses more than a decades’ experience into a five-minute read, helping you navigate the complicated world of RIAs and find the path that will best serve your goals.
