Breaking Away to Form Your New RIA Without Violating the Broker Protocol

When it comes to breaking away from your wirehouse or IBD to start a new RIA, you want to make sure you do it right. One wrong step and you could find yourself the defendant in a court case against a giant corporation. So how can you proceed with caution? 

Most firms will operate under the guidance of Broker Protocol to guide what you can and can’t take with you when leaving your existing employer. 

I say “most firms” because a few years back, some of the bigger firms looked up and noticed that they were bleeding brokers, so a few of them decided to withdraw from the protocol to try to cauterize the wound. For that reason, it’s worth checking if your firm adheres to it. 

(If they don’t, you can find some great guidance on transitioning here.)

If you’ve never read the protocol before, I’d recommend looking it over. Yes, it is a dry read, but it includes good insights.  It’s also mercifully short, coming in at less than 1,200 words.

Today, we’ll highlight key passages in the protocol that speak to your responsibility as the departing party. This is by no means an exhaustive exploration of the entire protocol. It is, however, a high-level view to help you understand what’s expected of you.

Key Broker Protocol Passages to Know for Breakaway RIAs

You can find the first nugget I want to look at today at the top of paragraph two (emphasis mine):

When RRs move from one firm to another and both firms are signatories to this protocol, they may take only the following account information: client name, address, phone number, email address, and account title of the clients that they serviced while at the firm (“the Client Information”) and are prohibited from taking any other documents or information. 

So that’s five pieces of information you can take with you:

1. Client name
2. Address
3. Phone number
4. Email address
5. Account title

Take every name, address, number and other piece of information you have on every client. Full name, maiden name, former address, work address, home address, cell phone, home phone, work phone, etc. 

You don’t want to try to reach a former client only to find that you have the wrong phone number.

It should go without saying, but take note that you may only keep information on clients that you serviced while at your soon-to-be former firm. 

But, try to take any additional information beyond those 5 things with you and you could land your new firm in some very hot water—like being sued by your former employer. 

Timing Your Resignation

Resignations will be in writing delivered to local branch management. They shall include a copy of the Client Information that the RR is taking with him or her.

The Broker Protocol indicates that when you submit your resignation, you should do so in writing. Include a list of all client information you plan to take with you.

Even if your former firm disagrees with your list of client information, the protocol says you will be protected—provided you assembled your list in “good faith.” Try anything funny here, and you could make everything that follows much harder on yourself.

Wrapped in the process of making a clean break is knowing when to tell your current employer about your plans to leave. 

In short, don’t let them in on your new launch until you’re 100% ready to start with your new firm. 

Sending an email about your planned departure from your corporate address can trigger a multitude of red flags. This simple mistake can speed up your timeline considerably. 

We’ve all heard plenty of stories of advisors who found themselves unemployed a full six months or more before they planned to leave. The reason? Their firm monitored employee email for specific phrases that they used.

That’s actually the entire reason we started Fusion Black Ops—to protect advisors who want to start their own RIA—but that’s a story that we’ll get more into another day.

Related: Click here to download our Fusion Black Ops fact sheet and learn how we can help you safely get from point A to RIA.

When to Contact Your Clients

RRs that comply with this protocol would be free to solicit customers that they serviced while at their former firms, but only after they have joined their new firms.

The Broker Protocol is clear that you may not try to solicit clients before leaving. After you’ve left your firm, you can finally share your news and ask clients to bring their accounts with you. But, make sure you wait until you are completely free from your previous firm. As always, keep your non-compete and non-solicit agreements in mind too.

You do have to be officially employed at your new RIA in order to make contact with your (now former) clients and solicit them to join you by moving their accounts to your new business, which is why it’s so critical that you keep your move a secret up until the moment that you’re ready to launch.

It shall not be a violation of this protocol for an RR, prior to his or her resignation, to provide another firm with information related to the RR’s business, other than account statements, so long as that information does not reveal client identity.

Translation: You can tell your new firm how much business you expect you’ll be able to bring with you, but that’s it—until you’ve left your old firm and are officially employed at your new firm.

Like I said, that’s not everything the Broker Protocol covers, so check it out for yourself. 

Want professional help splitting up with your old employer? Reach out to Fusion today and we’ll help you build a clear, safe roadmap to independence.