Take clients with you when switching firms

Going to another firm isn’t easy, given the risk of losing part of your book. To mitigate this risk, industry experts and advisors who have successfully moved clients say to position it as: This move’s best for you, not just for me.

Take Darren Coleman, who moved from Toronto Dominion to HSBC Securities in 2009 to be with a firm with global capabilities. But HSBC’s Canadian retail brokerage unit was subsequently sold to National Bank of Canada in January 2012, so Coleman’s desire to be with an international firm was thwarted.

He moved to Raymond James in May 2012 and explained to his clients why he switched again after the merger. “We ran a significant risk of losing clients just because of the amount of turnover,” recalls Coleman.

More advisors have been finding themselves in Coleman’s shoes given the recent string of acquisitions.

Read: How to switch firms

National Bank of Canada alone acquired two brokerage firms – Wellington West and HSBC’s brokerage arm in a span of six months in 2011. The acquisitions saw defections from both firms, particularly at HSBC. And, Richardson GMP bought Macquarie Private Wealth in 2013, spawning more moves.

“If you moved because you’re angry, that’s not enough,” says Coleman. “You have to be focused on the benefit to the client.”

Explaining your move

Coleman explained his team was moving away from challenges and stresses they found difficult at the old firm. “That’s the short part of the conversation because that’s negative,” he says.

The bigger part of the discussion was what they were moving to. Coleman’s script specifically highlighted the importance of being with an independent channel that doesn’t manufacture proprietary products. He also emphasized the importance of being with a firm with North American capability given their many Canadian clients who reside both in the U.S. and Canada.

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In five weeks, all but two of Coleman’s clients moved to Raymond James. He had 140 accounts when he switched, and added 37% into them after a year.

“Once the client has signed the new paperwork, we consider it mission accomplished,” says Coleman. “Our plan was to transition clients as quickly as possible so we could return to growing as quickly as possible,” he adds.

Norm Trainor, CEO of Toronto-based consulting firm Covenant Group, says that while transitions usually occur over several months or years, the first three months are critical.

“There’s a tight window where they’ve got to get the client mobilized and over to them; otherwise, uncertainty and doubts set in,” says Trainor.

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Dealing with resistance

Advisors can address client resistance by highlighting the consequences of not moving with them, such as starting over with an unfamiliar advisor. “There has to be a greater benefit to the client in moving [with the advisor] than in maintaining the status quo,” says Trainor.

Another challenge is not having full access to clients’ account information. Clients in bank-owned brokerages, particularly, are considered clients of the institution. So advisors are only allowed a list of client names and phone numbers when they jump ship. However, advisors can ask clients to give them account documents once they agree to move.

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Gary Mayzes, managing director for strategic advisory programs at CIBC Wood Gundy, says clients don’t always understand that their advisors can’t take information with them once they move. But once explained, most clients understand the situation, he says. The repapering process also ensures advisors have the latest client information.

Evelyn Juan is a Toronto-based financial journalist who writes about the wealth management sector. Follow her @evelynjuan on Twitter.