Going Independent? Legal Dos and Don’ts when Communicating with Clients 

Breaking away from an existing firm to go independent and start your own RIA is an exciting transition. It’s a move that can takes months or years of preparation, and when you’re finally ready to leave, you may be tempted to let your current clients know. But this could result in complicated legal issues. Here are things you should keep in mind when making the transition: 

Before the Move

According to Brian Neville, Esq. of Lax and Neville LLP, advisors have a common law duty of loyalty to their employer to act in that employer’s best interest until they resign. However, they are all at-will employees and can interview and make arrangements for a new role — they just cannot pre-solicit any of their clients to move to their new firm.  

Dos

  • Find out if your firm is a Broker Protocol firm or not.  This will dictate what you can and cannot do with respect to soliciting clients you have now. 
  • Do engage an attorney who specializes in working with financial planners breaking away. This can be a minefield, and an expensive legal issue if you don’t navigate your move correctly. 
  • After resigning and joining the new firm, you can be proactive and explain to clients that you wanted to discuss the move but couldn’t because of legal reasons. But only reach out to clients once you know where you stand here legally. 
  • Do connect with all clients on LinkedIn now, well before you plan to move. In many cases, you will not be allowed to contact former clients; but if they are connected to you on social media, they will see your announcements and know how to contact you should they want to. 

Don’ts

  • No client should know you are moving. It should never come up until you cleanly depart, and only when you know what you are legally allowed to do here. 
  • Don’t talk to other advisors in your firm about your plans to leave.  Word can get back to clients, which you want to avoid until you have left.

 

After the Move

In 2004, The Protocol for Broker Recruiting was established to facilitate advisor transitions and reduce litigation. As of writing this, 1,939 firms have signed the Broker Protocol Agreement. 

Dos for Advisors at Protocol Firms

    1. Name  
    2. Email  
    3. Address  
    4. Telephone number  
    5.  Account type
  • When you turn in your resignation letter, you have to give notice of what client info you are taking and which particular clients. 
  • Ask your employer if you can take any materials you have accumulated over time that you’d find helpful in your new practice. But be prepared for them to say no. 
  • Compliance needs and issues are different depending on where you’re going. It’s important to work with an experienced attorney throughout the transition.

Don’ts for Advisors at Protocol Firms

  • You cannot take any information other than the five pieces of information specified above. If you take anything beyond the Broker Protocol agreement, this could open you up to Reg S-P violations, breach of employment contract, or other litigation. 
  • You can only use the client information for soliciting those clients. And only those clients you are allowed to solicit. 
  • Prior to leaving, the old firm is free to enforce “whatever contractual, statutory or common law restrictions existed on the solicitation of clients.” 

Dos for Advisors from Non-Protocol Firms

  • Non-Protocol moves can still happen successfully. Advisors can utilize publicly available sources to find client contact information. But again, you cannot contact clients that are not allowed. Just because you can find their information publicly does not mean you can solicit them. Know your rights here based on your agreement with your employer. 
  • Craft a customized strategy for announcing the move. Equita, as well as your attorney, can help with this.  
  • Plan to reach out to those clients you are allowed to contact the minute you give your resignation. Your now former firm will contact those clients immediately to try to retain them. 
  • It’s important to articulate the benefits of the move to clients. Create a phone script highlighting the advantages of the move.  
  • Also emphasize what will not change with the move, such as the client service model, regular client reviews, and direct access to the advisor and support staff.  
  • Explain why the move is in everyone’s best interest.  
  • Equita Financial Network provides these templates for our Member Firms.

Don’ts for Advisors from Non-Protocol Firms

  • Advisors moving from non-Protocol firms must adhere to their employment contract. You cannot take any client information and cannot solicit clients, asking them to follow you.

 

Break Away and Start Your Own Firm with Equita’s Help 

 You should seek proper legal counsel from an experienced securities attorney to learn what type of communication is permitted in your particular case. Equita Financial Network also helps Member Firms with navigating this transition. We provide you with resources and support so you can announce your move from your current firm with confidence. Reach out to our team today. 

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