Retaining Clients

Issues for Financial Advisors Changing Firms

Pedestrians walk past Merrill Lynch offices in New York City
••• Merrill Lynch is just one example of a firm that advisors move to and from. Daniel Barry/Getty Images News/Getty Images

Financial advisors, especially seasoned professionals with large books of business, sometimes find it advantageous to change firms, from both a financial advisor compensation standpoint and a practice development angle. In any case, a vital consideration is retaining clients in moves, which also typically involves adherence to the Protocol for Broker Recruiting. Accordingly, among the most important issues to consider when contemplating a change of firm are:

Costs to the Client:

The comparative costs of doing business at your new and old firms will be a major consideration for most clients. This includes both fees and commission schedules. If your new firm has much higher costs, the ability to offer discounts to your old clients (so that they incur no net new incremental costs of doing business with you) may be vital to persuade them to transfer their accounts.

Clients' Primary Loyalty:

Another crucial consideration is whether your clients' primary loyalty is to you or to your old firm. The latter may be the case for clients whose accounts were transferred to you from other financial advisors who retired or left the firm. In any case, understanding the attitudes of your clients on this score is vital to making an informed decision about changing firms and your odds of retaining clients. Major determinants of client loyalty to a particular firm are its reputation and commitment to client service.

Reputation of the New Firm:

The reputation, resources and product offerings of your new firm are another key factor. Leaving an established industry leader for a smaller or less well regarded firm can be problematic on this score, especially if your new firm has considerably less to offer the client than your former employer.

In particular, joining a firm that has had compliance and regulatory issues, especially well publicized ones, is bound to make retaining clients more difficult.


Your compensation model at the new firm is, of course, a major consideration for you. It also will be of interest to your most sophisticated clients. In particular, they will be concerned about whether it lessens potential conflicts of interest.

Transfer Fees:

Some brokerage firms impose account closing or transfer fees to discourage clients from moving their accounts. If either your new firm or you is unwilling or unable to absorb these fees, some or your old clients are bound to balk at following you.

Transfer Hassles:

Potential errors or delays in the transfer process, and the associated costs or hassles borne by clients, can discourage them from moving their accounts to your new firm. Whether these problems are the fault of your old firm or your new firm, they can create negative feelings among clients that choose to follow you. Included herein can be the inevitable inconvenience to clients associated with their changing of direct deposits, direct debits and credit card accounts. You and your sales assistants should be prepared to do whatever is necessary to smooth these transitions for clients.


The income tax consequences (federal, state and possibly also local) of having to liquidate positions in the old firm's proprietary products (such as mutual funds or other managed money accounts) can be a significant impediment to retaining clients in moves. This is an issue when holdings of such products cannot be transferred to an account at another brokerage firm.

As part of your recruitment incentives, and in addition to such inducements as a signing bonus, you should seek to have your new firm absorb as much of the transition costs that clients will absorb, to encourage them to follow you.

Getting Clients to Follow Source: "Your Adviser Is Changing Firms. Should You Follow?" The Wall Street Journal, 7/6/2010.