By George C. Miller, Esq. of Shustak Reynolds & Partners, P.C. posted on Tuesday, October 20, 2020.

George C. Miller

Partner

Location: San Diego, California
Phone: (619) 696-9500 (Ext. 105)
Direct: (619) 501-8270
Email: [email protected]

In our March 2020 post, published soon after stay-at-home orders were issued across the country, we hypothesized that the pandemic could present a unique opportunity for financial advisors seeking to transition from one firm to another. As it turns out, the number of advisors who have changed firms in 2020 is not all that different from years past. After an initial decline in mid-March, advisors have been moving at an increasing pace throughout the year. According to a Financial Advisor IQ article, the “game of musical chairs” continues, and advisor transitions have now returned to the same level as the fourth quarter of 2019. 

The reasons behind advisor transitions remain largely the same. Consolidation among broker-dealers, compensation changes at large wirehouse firms, and the continued shift towards independent and RIA platforms are driving movement. Citing an internal research study, Charles Phelan, vice president of practice management and consulting for Fidelity Clearing and Custody Solutions, states that between 6-9% of the nation’s advisor force will change firms each year. That appears to be the case, pandemic notwithstanding. With just under 700,000 actively licensed FINRA registered representatives, that translates to approximately 40,000 – 60,000 advisors changing firms each year.

It is critical for any firm or financial advisor dealing with a transition to seek sound advice from experienced counsel.  Every registered representative or advisor contract is different, and the rules governing the type of information an advisor can–and, more importantly, cannot–take will differ depending on Broker Protocol issues, Regulation S-P and other confidentiality issues, the nature of the firm-advisor relationship, the location of the advisor and firm, etc.  There is no one-size fits all approach to transitioning a book of business while minimizing the chance of litigation or a regulatory issue (potential regulatory violations, including violations of Regulation SP are often overlooked in a transition but equally as important). 

Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes. 
We represent many broker-dealers, registered representatives, investment advisors, investors and businesses. 
Partner George C. Miller can be reached in the firm’s San Diego office at (619) 696-9500. 

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