The independent broker dealer world has changed. Once, advisors were allowed to leave if they felt like the broker dealer was no longer a good fit for them. Now, IBDs are attempting to hinder advisors from leaving by punishing them as they head out the door.
IBDs don’t always employ these tactics, but it’s becoming more and more common to find them target advisors who leave to join specific broker-dealers that have had success recruiting from their firms.
These are some of the tactics that IBDs employ to prevent advisors from leaving for a competitor:
Refusal To Transfer Albridge Client Data
If an IBD is really looking to crack down on an advisor for leaving, they may refuse to transfer Albridge client data. When this happens, advisors may be forced to hire an attorney to fight to get the data transferred.
Refusal To Pay Residual Fees, Trails, And Commissions
Most of the time, broker-dealer contracts specify how long an IBD is required to continue to pay an advisor residual fees, trailing fees and commissions, generally anywhere between 30 to 90 days.
However, some IBDs have been known to refuse to pay advisors for the money earned during the contractual period.
Breaking Up Groups Of Advisors Who Have Decided To Depart
Some broker-dealers will attempt to intervene when they see a large group of advisors move to another firm. They may do so by offering raises and/or other rewards to team members to get them to stay.
It’s not uncommon for broker-dealers to react boldly when they see another BD attempting to take away a large group of their producing advisors. They’ve offered everything from an enhanced payout, or even 100% payout for up to three years to Waiving broker-dealer expenses for 1-2 years to Rebate of Envestnet costs and more.
While this may seem perfectly fair and like a bonus to those who decide to stay being, large groups should be able to move freely to a new firms with all the other advisors in their group.
Reassign Clients
This is a wirehouse tactic through and through that is only seen rarely in the IBD world. But nonetheless, it happens from time to time that BDs will will try to convince clients to leave their advisors once the word on them moving comes to light.
Consequences
The consequences are purely in reputation. The street is small and word about spiteful and vicious behavior spreads quickly. In the end, it might poison recruiting waters, scaring off any elite talent that might have been heading their way. Afterall, reputation is all IBDs have in the end.
