8 Questions to Ask when Changing Firms

May 17, 2023 | Grow your Business, Practice Management


So, you’re thinking about switching firms? As a financial professional, changing firms is almost inevitable at some point in your career. Whether it’s due to corporate mergers, acquisitions, or personal frustration with your current firm, you’ll likely find yourself searching for a new broker-dealer and/or RIA partner. However, when evaluating potential partners, most financial professionals tend to focus solely on financials, rather than taking a more comprehensive approach.

The industry has long emphasized the financial benefits of changing firms, but what about the back-end economic effects that can negatively impact your bottom line? For example, a firm may offer a high gross payout and a large check to incentivize you to move, but if they charge substantial affiliation fees and even larger platform fees, your bottom line will quickly diminish.

It’s crucial to look beyond the financials to evaluate a potential partner firm completely. Here are some key questions to ask:

What is the ownership structure of the firm?

In today’s world of private equity, mergers, and acquisitions, it’s important to know if a firm is privately owned and if so, what the owner’s plans for the future are. If the firm is owned by private equity, they’re likely to sell at some point, which means repapering all over again in some cases. On the other hand, a publicly traded firm is well-capitalized, but its fiduciary duty lies with shareholders rather than financial professionals. Understanding what you’re joining is critical, as it will impact your practice in one way or another.

What are the costs to affiliate with your firm?

Aside from payouts, many firms have “core affiliation” fees just to be onboard. They may be labeled as tech fees, compliance fees, affiliation fees, and so on. It’s important to understand what they are and how they compare to your current firm and the competition. Make sure you also understand every single fee the firm could potentially charge, as they may not mention some unless asked.

I manage my own client portfolios, is there an advisory platform fee?

Many firms have a platform fee that can range from 2-25 basis points, which can have a significant negative impact on your practice’s bottom line. Be sure to ask this question!

How often does your firm onboard financial professionals?

It’s essential to understand if your new partner firm has a deep understanding of repapering client accounts and moving practices. A dedicated transitions team with experience can be a game-changer for your success. Don’t be the guinea pig or one of the very few who have moved to a given firm, as it could be a nightmare.

Is your firm selective in whom they bring aboard?

It only takes a few bad apples to bring down a financial services firm these days. If a firm is willing to overlook regulatory red flags to win business, it could impact you and the firm negatively.

How many financial professionals have you lost in the past year?

This answer could offer a glimpse into a negative culture or fundamental flaws at a firm. Happy financial professionals don’t often leave their firms.

How many custodians can you access?

Having “choice” in how you serve your clients is essential because it means you’re not restricted. The ability to use more than one custodian can provide competitive pricing advantages and potentially help win new business if you come across a prospective client who wants to work with you but is not willing to leave a certain institution.

Will you help me add financial professionals to my practice?

Collaboration and scale are becoming increasingly important to financial professionals as they want to build something larger than themselves. You don’t want to have to compete with your own firm when it comes to recruiting. The right firm should be willing to assist you with the time and tools.

Key Takeaways

In conclusion, financial professionals who are considering changing firms should take a comprehensive approach when evaluating potential partners. Asking the right questions can help avoid negative economic effects that could impact your bottom line. By taking the time to thoroughly evaluate potential partners, you can make an informed decision that sets you up for success in the long run.

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