Wealth In Motion: How Top Breakaway RIAs Manage Asset Transitions

Strategies, Challenges And Considerations For Migrating A Book Of Business Out Of A Wirehouse
Caitlin Douglas, Director of Transition Services and Co-Head of Service, Dynasty Financial Partners
Caitlin Douglas, Director of Transition Services and Co-Head of Service, Dynasty Financial Partners

The breakaway migration of wealth managers from brokerages to independent RIAs – spurred by advancements in financial technology, the spirit of entrepreneurship and a desire to give clients better service – has put a spotlight on the transition of client assets, and for good reason.

Private asset transitions involve substantial dollar amounts, confidential information and strict rules of conduct that require strategic planning, legal insight and a profound understanding of market dynamics and end-client needs. Success on this front is vital to the ongoing viability of any breakaway advisory team.

Setting The Stage

But before we offer a high-level view of strategies, challenges and ethical considerations for “repapering” a financial advisor’s book of business while ensuring client satisfaction and full legal compliance, let’s put the discussion in context.

Through the past decade, headcount at independent RIAs grew at a compounded yearly rate of 5.2%, outpacing other distribution channels, including the four so-called wirehouses, Morgan Stanley, Merrill Lynch, Wells Fargo and UBS. Remarkably, this change has occurred with the total number of advisors in decline. Meanwhile, between 2006 and 2018, independent advisors nearly doubled their share of wealth-management assets to 27%.

Asset transitions can overwhelm advisors.

This movement of talent and money is frequently punctuated by asset transitions in an intensive and multifaceted process that can overwhelm advisors.

Preparing For Transition

A comprehensive business plan underpins every successful transition. It’s a way to anticipate challenges, allocate resources and tackle contingencies. Firms with road-tested transition plans are better equipped to track every predictable step and sidestep unforeseen roadblocks.

Navigating potential conflicts of interest is another essential aspect of managing a winning transition. Firms must uphold high ethical standards and maintain transparency throughout the transition, ensuring that all decisions and actions align with the clients’ best interests and comply with all legal and regulatory standards.

Managing transitions is easier with the aid of a dedicated project management system. These (often proprietary) software platforms separate each transition into manageable phases, ensuring thoroughness and accountability. Every step addresses a specific aspect of the transition – from legal compliance to asset reallocation – to ensure everything is on track.

Following Through

Though the timeline for asset transitions will vary – influenced by marketing considerations, real estate logistics and team preparedness – a step-by-step approach, with clear milestones and benchmarks, is essential. This approach helps teams monitor progress and make necessary adjustments while ensuring all aspects of the transition are handled efficiently.

Maintaining client trust and satisfaction during transitions is a must, including effective communication with regular updates and transparency. Transition teams must balance the technical aspects of the transition with the need to nourish robust and supportive client relationships.

Hard-To-Move Assets

Moving complex or proprietary assets requires the expertise of transition consultants. These professionals bring the institutional knowledge and experience essential for understanding how to move your book of business with as little friction as possible.

Experienced transition consultants can identify potentially challenging accounts, such as ones with bespoke investment products and high-interest cash positions, and formulate plans to move them. When transferring certain investments isn’t feasible, these consultants help transitioning advisors uphold their clients’ best interests.

To this end, completing a comprehensive asset “mapping” of an advisor’s book of business is a critical step to a successful transition.

Moving complex or proprietary assets requires the expertise of transition consultants.

Bigger Teams, Deeper Menus

Breakaway teams are getting bigger – and bigger teams, particularly when spread across multiple locations, can add significant complexity to transitions. As mentioned, outside experts, strategic planning and sophisticated technology can help manage and coordinate even the biggest transitions with confidence.

Besides logistical and operational challenges, asset transitions can call for an expansion of services to meet the needs of individual clients. As a result, wealth management teams should be ready to introduce new offerings or adapt existing services and products to retain clients and attract new business. Frequently, this adaptability will involve market research, client consultations and internal training to ensure that the expanded services align with client expectations.

The movement of financial advisors from traditional brokerages to independent RIAs calls for moving client assets en masse. Success in these transitions is a predicate for the long-term viability of any new firm, and the most successful of these transitions are marked by strategic planning, legal insight, effective technology and expert guidance, all of it rooted in an abiding commitment to putting the client first.

Caitlin Douglas is Director of Transition Services and Co-Head of Service at Dynasty Financial Partners.

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