How to Ensure a Smooth Transition to Your New RIA Firm

If you're an established financial advisor setting out to launch your own Registered Investment Advisor (RIA) firm, transitioning clients from your previous firm is likely at the forefront of your concerns. Managing this process effectively is crucial for retaining clients and ensuring compliance. Here’s a step-by-step guide to help you navigate a seamless transition.

Introducing the Transition

When leaving a firm, especially if it’s a large broker-dealer or bank, many clients may feel secure within the “one-stop shop” ecosystem. Clients often appreciate the convenience of having all financial services in one place. However, as you shift, remember that clients may not automatically follow. Your former firm will likely make a solid effort to retain them, so careful preparation is essential.

Before you start, double-check for any non-compete or non-solicit clauses in your employment agreement to avoid legal liabilities. Consider consulting with an employment attorney to fully understand the terms and ensure your actions align with any restrictions.

Step One: Communicate Carefully

Your clients will appreciate early and clear communication. The focus is on reassurance, showing clients they’ll receive even better service at your new firm. Here’s how to do it:

1. Understand Your Agreements: 

Contact an employment attorney to clarify what you can and cannot do regarding client information. Many employment contracts include restrictions on non-solicitation, confidentiality, and non-compete clauses. Outline these limitations early to prevent misunderstandings.

2. Prepare Your Client Communication Strategy:

Direct Communication (if allowed): If your non-compete agreement allows it, speak to clients personally, either through a phone call or a meeting. Introduce your plans and let clients know they’ll receive more information soon.

Public Announcements: If you cannot reach clients directly, make a public-facing announcement once your firm’s registration is approved. Always avoid mentioning the new firm’s name until it is fully registered.

3. Frame the Message:

Use positive and client-centered messaging. Emphasize the improvements your transition offers them for their financial success and how you’ll operate moving forward. Highlighting how this change will allow you to offer a more personalized experience will help build excitement and trust.

Avoid Using “If”: Keep language confident to encourage a smooth transition. Phrases like “At my new firm, we’ll…” and “You’ll enjoy…” reinforce a seamless client journey.

4. Follow-Up Communication:

Regular updates via email will keep clients informed about your progress, the timeline, and any changes they need to know.

Step Two: Start the Onboarding Process

The move to a new RIA involves considerable paperwork, especially when transferring accounts. Here’s a breakdown of common scenarios:

Scenario 1: Friendly Transition from an existing RIA

Ensure your custodian receives notice of your intention to depart. Once your new firm is ready, have clients sign an Investment Advisor Limited Power of Attorney (LPOA) form. This form updates their information seamlessly, keeping the transition smooth. Additional forms, such as new account applications and transfer forms, may be needed. Anticipate a longer transition time due to paperwork and signature requirements. 

Scenario 2: Challenging Transition from an existing RIA

In a contentious transition, your former firm may delay or contest transfers. Your custodian generally won’t intervene, so prepare for a potential delay. If non-compete clauses restrict you, clients must seek you out independently. In a difficult breakup, you may not be able to take client data with you. Encourage clients to bring any relevant information when they’re ready. 

Scenario 3: Breaking Away from a Wirehouse or Broker-Dealer

A broker-dealer transition often involves more documentation, including account applications, transfer forms, and new bank linking paperwork. Schwab can assist if you handle a high volume of client assets. Be mindful of privacy regulations and restrictions on transferring planning or performance data. Clients can consolidate essential documents in a secure document-sharing platform to make the transfer easier.

Step Three: Finalize the Transition and Focus on Client Onboarding

Once clients are on board, the onboarding process mirrors a new client engagement. Provide clients with:

• A new contract, ADV, IPS, and privacy policy
• Billing information and any fee changes
• An outline of any new technology or engagement methods

During this phase, prioritize transitioning clients before pursuing aggressive new-client marketing campaigns. This approach lets you give these loyal clients your full attention as they acclimate to the new firm. You can seek out additional clients later. 

You’ve got this! 

Moving clients from one firm to another is a significant undertaking. Still, with careful planning, clear communication, and a client-first approach, you can make the transition as smooth as possible. This transition isn’t just about logistics; it’s about reaffirming trust and showing clients the benefits of your new firm. By following these steps, you’ll set up a strong foundation for your new RIA and your client relationships.