Recently, an article was published by The Street entitled, “If Your Financial Adviser Leaves These Are The Must-Know Steps to Take.” The article cites a study that was conducted, that in part, evaluated the impact to a firm when an advisor leaves their firm. The study estimates that the firm an advisor leaves loses approximately $2 million in client revenue. The article also acknowledges something that is not as evident – the impact to the clients of an advisor who leaves a firm.
An advisor quoted for the article states, “If an adviser switches firms, it is important for the client to thoughtfully evaluate the reasons the adviser is switching.” There are a number of reasons that an advisor might choose to switch firms. In my experience speaking with advisors exploring the option of affiliating with Dynamic Wealth Advisors, they are typically those who are seeking a role that permits them to serve their clients at a higher level. All are seeking to own their practice. There are also advisors who have affiliated with my firm after closing their own advisory firm so that they could outsource the back and middle office functions, and focus on what they do best – working with their clients, and having time to grow their business.
Another advisor quoted in the article mentions that upon learning that their advisor has left their current firm, clients have the right to ask questions of both the advisor, and the firm they left. When speaking with their advisor, clients should ask about the reasons for the departure. When speaking with the firm, clients should ask how they would be assigned to another advisor at the firm.
That same advisor has a list of questions they recommend clients ask their advisor upon learning they have left:
– What prompted the switch?
– Will your support staff be going with you?
– How will your fees and costs change?
– What will happen to the fees you have already paid for this most recent quarter?
– Will you be violating a non-compete? Will you be pulled into the middle of legal proceedings?
While I agree with several of the questions, I think there are some other questions that clients might ask. Asking how fees and costs may change is a good idea, but it is also important to understand if the advisor will be enhancing the services they provide. Chances are, the move was designed to improve the service the advisor could provide to their clients. With respect to the question of a non-compete (or non-solicit), Dynamic Wealth Advisors insists that advisors covered by any sort of employment agreement consult with legal counsel, and not violate any employment agreements. A better question to ask might be if the advisor has any employment agreements with their now former firm.
Ultimately, any decision to follow their advisor to their new firm should be an informed decision, and one that is the decision of the client.
To find the article mentioned in this post, click here: https://cdn.ampproject.org/c/s/www.thestreet.com/amp/story/13941875/1/take-these-steps-if-your-financial-advisor-switches-firms.html