The act of "breaking away" is not a single act at all: It is a series of decisions and actions that ultimately result in the launch of a new business. The brand-new can feel equal parts exciting and terrifying, and knowing what to do in the weeks and days before and after you depart from the wirehouse can feel confusing at times.
When do you tell the wirehouse your big news? When do you advertise for business? At what point do you establish the necessary infrastructure and systems in your new office space? And what about announcing your move to clients without bumping into compliance issues? The change can be exciting, but taking the proper steps will ensure a lawsuit- and blemish-free transition. Here are some tips.
Hire legal counsel
The top priority for anyone transitioning from a wirehouse to independence is to hire a legal team. Look for firms well-versed in breakaway-specific thorny issues, such as how to navigate communication with colleagues and clients without getting sued by your soon-to-be-former employer. The timeframe for this is flexible, but the sooner the better.
An experienced legal team can also provide cover for advisors during crucial steps in the process. In the case of 6 Meridian, a Wichita, Kan.-based RIA, their legal team secured a new office space under a separate name to insulate the new business from premature announcement or discovery.
Consider A Consultant or Strategic Partnership
Since there is so much to keep track of when planning your exit, advisors run the risk of burnout or fatigue. Attempting to manage this completely new process, all while maintaining your day job, can even lead some advisors to throw up their hands and abandon plans entirely.
The way to combat frustration, according to Sean Keenan, director of business development at BNY Mellon’s Pershing, is to hire a consultant or work with a strategic partner such as a custodian. This allows advisors “to hit the ground running,” says Keenan. “We go through an exhaustive exercise on different critical points. We want them to have the freedom to build an external brand.”
Pershing’s custodial services and consulting teams help newly independent firms with transition support, an open architecture platform, comprehensive wealth solutions, and technology. Custodians are among the first options for advisors looking for guidance as they work through this process.
The end goal is to help an advisor or team create the best business for their unique, specific needs. “We become that landing pad that allows them to launch a firm with minimal disruption and to be their partner along the way — not just during the transition, but well beyond the transition, to help them grow,” says Keenan.
Keep your team informed
Keeping a quiet, united front during a period of intense anticipation and change isn’t impossible. The key: communicate clearly and consistently. Kimberly Papedis, president and co-founder of Fusion Financial, says that with large teams, decision-makers run the risk of moving quickly and forgetting to keep everyone on the same page, which can sow discontent at a crucial time.
"Not that everyone has a vote, but it’s about constant communication. No one likes to be left in the dark," she says. “Keeping your advisors informed is a great way to ensure that they feel like they’re included and being heard — and ensure that they’ll move with you."
Setting up your systems
Always remember to keep the end goal in mind. Define what your team needs to set up a new, self-contained operation. Assess your back-office needs — such as the tech stack, compliance programs, processes, and procedures — keeping in mind your team’s strengths and the service(s) you want to provide clients. Know how you will establish the proper infrastructure to get everything up and running.
Next up, begin sketching out your marketing and PR strategies and brand DNA, clearly outlining expectations around the roles that digital marketing and media will play.
Teams also need to consider "basic blocking and tackling like office space, and where you’re going to sit," says Ed Swenson, chief operating officer of Dynasty Financial Partners.
But all the technological bells and whistles in the world render themselves meaningless if they do not fit with your new systems and resonate with your staff and clients. The best way to avoid a tech snafu is to work with a strategic partner or technology provider to ensure staff is adequately trained and fluent in the software and systems and able to translate them accurately for interaction with clients.
If you have a clear idea of what you want to accomplish, that knowledge will see you through the natural periods of nervousness and anxiety which come with any big life-changing event – like breaking away. Margaret Dechant, partner and founder of 6 Meridian, recalls reminding herself and her team they were all going to something rather than leaving something behind.
Admitting that breaking away is not for the weak, she advises, "You have to have a vision and a strong desire to be bigger, better, faster, stronger. It’s a very detailed process. And what kept us moving was the fact that we knew what we wanted, and that was to own our own business and do better things for our clients and our people."
Loose lips sink ships
During the final days leading up to departure, fatigue and worry can set in. Be sure not to let slip news of your departure to clients or colleagues before the time is right. Anxiety over whether clients will follow is valid. But it’s essential to keep mum until counsel gives you the go-ahead because the repercussions of a leak could be far worse than any anxiety.
"It is critical that you follow the rules," says Dechant, who understands wanting to call a top client to gauge interest in moving with you because walking out the door and starting at zero is frightening. "There’s no substitute for doing it the right way, because this is a difficult but rewarding process. And if you have a lawsuit thrown in the middle of it, I can’t even imagine what that’s like."
Carve out an economic model and follow it closely
Swenson also stresses getting an economic model and accounting structure in place. “A very important part is what is the economic entity — this new company — what are the economics going to look like at scale?”
According to Dynasty Financial Partners, on average, firms can expect 50% of assets to come across in three months and 90% to come across in six months post-breakaway, so a careful tracking of your new firm’s economic model is important.
"After months six to 12, it’s very important to be disciplined and track towards those goals — those milestones from an economic perspective," says Joe Rizzo, director of RIA growth strategies for Dynasty Financial Partners. "With our network partners, they get to a six month or one year mark, and they understand the financials."
Reshuffle, reevaluate, repurpose
When finally you can breathe easy post-breakaway, it’s a great time to reevaluate your team and consider how they might be better utilized. Clients with Dynasty are encouraged to look at the middle- and back-office to review the structure and process around engagement.
"You might find that there’s more streamlined workflow because of Dynasty’s partnership," says Rizzo. "That means you might be able to repurpose someone to a role that’s focused on business development, versus keeping them in an operational role."
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