3 Mistakes to Avoid when Switching Broker-Dealers

The COVID-19 pandemic ignited a mass exodus of employees from American companies, a trend economists call the “Great Resignation.” In April 2021, the number of workers who quit their jobs in a single month broke an all-time U.S. record. Those numbers continued to rise, fueled partly by people’s desire to leave less-than-ideal work environments and move to those that better aligned with their personal values.

The hospitality, health care and tech industries experienced significant turnover, but what about financial services? It turns out that financial advisors changed employers en masse as well. Nearly one in 10 advisors moved in 2020, and similar activity is expected once the final 2021 numbers are tallied. Like professionals in other industries, financial advisors felt, and heeded, “the pull toward something better.”

So, what does “something better” look like?

An increasing number of advisors are switching to firms that respect the advisor–client relationship, allow for greater flexibility and control over their business, and provide a straightforward, stable compensation structure that supports a planning-first environment. Well run hybrid groups – a combination of a B/D and independent RIA – are uniquely positioned to provide these types of advantages, offering a strong network of advisor support; a flatter, more streamlined management structure that promotes quicker decision making than some wirehouses, traditional B/D’s, and insurance-owned B/D’s.

If you are one of the many advisors who is thinking about making a broker-dealer change, avoid the following three common mistakes.

1. Be careful about signing a contract that obligates you to pay 5 percent or more of your gross dealer concession (GDC) to a headhunter

Some advisors who are ready to make a move engage headhunters or “consulting firms” to assist them in their search. Be careful about this approach; you could end up paying a hefty fee. Although firm reps of a headhunter firm might tell you their services won’t cost you anything and that the firm you move to will pay the fee, in many cases, you end up paying the fee because it comes out of your final transition package you ultimately receive.

Most firms use sophisticated algorithms to determine the costs associated with referred advisors, and headhunter fees are a big piece of the puzzle. However, there are techniques you can use to negotiate a better onboarding package, we can help you x-ray an agreement of a headhunter. When it comes to headhunters, many are well connected and know how to “sweeten” the deal, and a well-positioned headhunter with a wide scope of relationships may be worth any fee paid. It also pays to have a second set of eyes on your contracts, we can help.

Also, make sure you take steps to transition your practice without violating your contract with your previous firm and putting yourself at risk of being sued. The trick is to know where those gaps in the contract are and to use them properly. Most firms have covenants that restrict the ability of advisors who leave their firms to use the firm’s “confidential information” and to “solicit” their current clients to move their accounts to wherever they are going. Don’t let these contractual warnings intimidate you; although laden with landmines, we may be able to help you navigate a safe passage through.

2. Be clear about what you want and where you are going

Most advisors we talk to share with us that their next broker-dealer change is the last one they ever want to make! If that is the case for you, then organize your next steps. Most importantly, understand what your practice needs are today and into the future.

For example, if you are a financial planner first, seek out a firm that will enable you to focus on client development and relationships. And if you are in growth mode, what can a new firm offer you in the form of engaging practices to purchase and financing the deals so you can make a purchase or two?

Advisor transitions to new broker-dealers can get bogged down in bureaucracy and delays, so be sure to ask a lot of questions before you make a move. Go to www.homeforhybrids.com for additional strategies to consider. Find out how quickly your practice will be up and running and what safeguards the new firm offers for making this process efficient — before, during and after your transition.

3. When comparing potential groups to join, make sure they score high on your checklist

Once you are clear about your priorities — what your new firm will offer that will enable you to run the type of practice you have always envisioned — write those priorities down, in order of their importance to you. Then, as you research and interview with various firms, keep good notes regarding each firm’s strengths and weaknesses in those areas. We have been told by advisors on the move that they want a new relationship to provide all of the following:

  • A Firm Dedicated to Support an Advisor that Offers a Planning-First Approach
  • A Dedicated Management Group to Support You and Your Team
  • A Focus on Partner Advisor Independence
  • A Customized Partner Advisor Tech Stack
  • Operations and Practice Management Consulting
  • Dedicated Business Development Partners
  • Community Interface Opportunities
  • Vetted Partner Advisor Services
  • Access to Capital for Practice Growth and Expansion
  • Continuity and Succession Plan Consulting
  • RIA Ownership Options

We hope you will include The AmeriFlex Group in your search. Since 2019, we have helped 80+ advisors and firms move $5+ billion in assets under administration. We streamlined these transitions by providing a customized solution for all advisors who joined us, along with his or her team and their client accounts.

If you want to get back to the basics of servicing your existing clients and engaging prospective new clients optimally; are tired of the day-to-day battles with regulators, compliance, and supervision; and want a custom-built growth plan to take your practice to the next level, contact us to discuss your transition and growth plan with one of our experienced consultants.

Securities and investment advisory services offered through SagePoint Financial, Inc. (SPF), member FINRA/SIPC. Additional Investment advisory services offered through The AmeriFlex Group®, an Independent Registered Investment Advisor. SPF is separately owned and other entities and/or marketing names, products or services referenced here are independent of SPF. Insurance is offered independent of SPF.

8485 W Sunset Road, Suite 204, Las Vegas, NV 89113


If you would like more information, please contact Jesse Kurrasch at (702) 987-9732, by email at [email protected] or visit us at www.ameriflex.com. Securities offered through SagePoint Financial, Inc. (SPF), member FINRA/SIPC.