The Transition Blues
Avoiding Bad Habits and Starting Fresh
Congratulations! You’ve made the decision to move to a new wealth management firm. The anxiety has all passed, garden leaves and non-solicitation agreements are legally complete, and it’s day one of a new beginning.
You have determined the ADV to follow, set up your DBA, found office space, worked through your operating agreement with your partner(s), put seed capital in play, and created your marketing/branding pieces. You’re tired and the real work has only just begun.
So, now what?
It’s time to better understand your new technology platform, including what types of accounts are available (e.g. UMA, SMA, TAMP, TPAM, RPM), the associated costs, and what offerings are permitted. For example, UMA accounts may offer open architecture of mutual funds, ETFs, and individual securities, while digital platforms are more model driven with ETFs and direct indexing. If Rep as PM is your preference, there will be some compliance “guardrails” before opening accounts, so get yourself and your staff trained accordingly.
Documentation of each client for auditing and discovery purposes are essential. Be sure your compliance policies and procedures are memorized and implemented.
What is imperfect today, will only get even more relaxed and problematic tomorrow.
Software training on risk tolerance evaluation and documentation of each client conversation through a robust CRM and archiving system must be in place. Remember, you are not just moving firms, you are changing your bottom up and top down approach to the way you conduct business. Risk is not just found in the markets, it’s also in the way you run your practice.
Create a flow chart of roles and responsibilities and the processes and sub-processes of each. Below is a simple example of what you may create:
Now is the time to acknowledge the possibility that the way you’ve managed your middle and back office in the past may not have been ideal. Some pitfalls to be aware of when beginning a new venture include:
Jumping to conclusions.
Not confirming what you were told.
Only hearing what you want to hear.
Trying to recreate the way you did things before.
Thinking like this allows you to stay in the comfort zone of your previous experience, even if it was not that comfortable, but it may also limit your future potential. Your staff will follow your lead. If you show your disdain for training, they will too.
This is the time to clean out the “attic” and start your business fresh. By setting the right regulatory framework, you will not only improve your scale and leverage, but your intrinsic value, as well. Advisors can always find AUM, but AUM wrapped in a tight regulatory process is considered a premium asset. If you were looking to buy another’s book, one of the liability concerns would the compliance mistakes made years ago one could not find during today’s due diligence process. Thus, a strong adherence to a tight process will only heighten you and your firm’s value.
Do it once, do it right, and start your business on a clean slate.
Rich DeSalvo, COO
Where Fiduciary Freedom is First
Advisory services are offered through F3Logic, LLC, a registered investment advisor. Securities offered through Independent Financial Group, LLC, a registered broker dealer. Member FINRA/SIPC. IFG is not affiliated with any of the entities listed. Additional advisory services may be offered by the respective entities listed as permissible by state law.