5 Tips for Retaining Clients After Leaving the Wirehouse

You’ve decided to break away from your wirehouse to establish your own firm. So, the next big question is: how will you get your clients to come with you?

When you leave, your old firm may try to keep your clients. You’ll want a strategy to match their efforts, which may include letters, emails, or even a representative calling to pick up where you left off.

These tips can help convince your clients to follow you—and keep you in check with compliance rules along the way.

1) Develop a departure plan. Existing clients can help build a solid foundation for your independent firm, so you’re not starting from scratch. In fact, according to recent research, about 80 percent of clients will follow their advisor to an independent practice. Although that sounds like a good turnout, that means you could leave roughly 20 percent of your business on the table.

These numbers also don’t account for planned attrition, which refers to clients you intentionally leave behind because they may be less profitable or don’t fit your new target market.

Before you announce your resignation, think about which clients you hope to bring with you and how you’ll convince them to do so.

2) Make sure you’re not breaking any rules. Contractual agreements can affect how you’re allowed to communicate with existing clients and what information you can keep.

Some financial firms may be members of the Broker Protocol, an industry agreement designed to facilitate advisor transitions and reduce unnecessary litigation. It outlines the steps and information you can take when leaving one signatory firm to join or start another. Although Protocol membership is voluntary, there are more than 2,000 members, including many major wirehouses.

You can check the Protocol directory to see whether your firm is a member. If so, thoroughly review the document and any other employment contracts to ensure that you make a clean break.

According to the Broker Protocol, you can retain the following information:

  • Client name
  • Phone number
  • Email address
  • Account type

You’ll need to inform your manager of your resignation in writing and include a copy of the client information you intend to take with you.

If your current firm is not a member of the Protocol, refer to any employment contracts you signed when joining the company. Some firms may explicitly prohibit you from taking any client information when you leave. In this case, you may have to resort to publicly available sources to find contact information.

3) Communicate at the right time. Although you may be eager to share the exciting news about your new firm with clients, avoid notifying anyone while you’re still employed at the wirehouse. Doing so beforehand may be considered a breach of contract or fiduciary duty to your current employer, whether they are a Protocol member or not.

Instead, wait until you’ve officially resigned and affiliated with your new firm (and your contract permits) to begin notifying existing clients of your move. Once the time is right, reach out as quickly and thoughtfully as possible. Consider seeking a securities attorney before your transition to provide you with a customized transition plan to avoid any legal ramifications and answer questions about the nuances of nonsolicitation, noncompete, and notification clauses.

4) Create a communication plan. How you communicate your move to existing clients will be a major factor in whether they decide to follow you. In addition, a solid client retention plan can get clients as excited about your new firm as you are.

Before contacting your clients, write discussion points explaining why this transition is in everyone’s best interest. Ideas to highlight include:

  • Your unique selling points. Outline the transition benefits for each client. Be sure to focus on any pain points your new firm can alleviate.
  • A continued partnership. Emphasize that, by continuing to work with you, clients won’t have to start over with a new advisor who doesn’t know them or their goals.
  • What you’ll do differently. Explain why you’re leaving the wirehouse (e.g., access to a larger variety of investment products or the ability to design your own investment management ideologies and philosophies). Focus on how you can better support each client’s needs through this change.
  • How easy it will be. Some clients may be hesitant about switching firms because they don’t want the headache of more paperwork. Share how you plan to make the process as painless as possible. Prepare all client agreements and account paperwork, making them easy for clients to understand and sign.

Although one phone call may be enough to convince longtime clients to make the move, it may take more effort with others. Consider implementing a thorough and ongoing marketing plan that will continue to get your word out there.

5) Partner with a firm that can help make the transition easier. If you’re ready to branch out on your own, an experienced partner firm such as Commonwealth can help with your transition and support your business as it grows. Our compliance checklist is a great starting point to protect you and your clients during this exciting and critical time.

Want to learn more? Contact us today.

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