You are in danger of living a life so comfortable and soft, that you will die without ever realizing your true potential.
—DAVID GOGGINS
We have a friend who handled the communications for a nonprofit organization. Much of his work involved developing branding and messaging for the internal team, meaning he dealt with internal customers and deadlines. He also had the following sign above his desk to deter emergency requests:
“Lack of planning on your part does not constitute an emergency on my part.”
A lack of planning breeds poor results, whether you’re a nonprofit communication department or, well, anything else. How many times have you told a client about their retirement that failing to plan is planning to fail? The more important the subject of the required plan, the more critical it is to have and follow it. That brings us to the immediate aftermath of your resignation from the mothership.
In the spirit of Dan Sullivan, the business author who penned the iconic business book Who, Not How: The Formula to Achieve Bigger Goals through Accelerating Teamwork, we are going to focus the next section of the chapter on helping you find the right people to put you on the path to success. We are not going to tell you how to make the transition. We are not lawyers—we don’t even play lawyers on TV—so we are not offering you legal or any other advice here except to recruit into your transition the people who can grease the skids to success, reduce your agita, and find you the best parking spot. Or any two of those three.
As his book’s title indicates, Sullivan deftly reorients readers away from focusing on how to get things done because that often puts the wrong people in the position of solving a problem; they are ill-equipped to solve. It also creates a micromanaging situation where the founder or CEO is pulling on their overalls and peering beneath the hood when they should focus their energies on the elements of the job; they know best and leave the trained mechanics to handle the problem. Instead of asking, “How do I do this?” he recommends you ask, “Who can help me achieve this?” That leverages the time and expertise of the right proper skill set for each issue.
Each transition situation is different. We hail from California and New Jersey, very different states with diverse laws. For example, in Carmine’s state, it is against the law for any municipality not to sport at least one authentic Italian restaurant. Whereas where Daren lives, it is mandatory to hug a tree whose trunk exceeds 6 feet in circumference when passing it. (These may not be actual laws. As we say, we’re not lawyers. But we can indeed say that defying these customs is socially unacceptable.)
Moreover, we left very different firms—one a life insurance company and the other a large brokerage—with different contractual languages about separation. Neither lovingly encouraged us to sprout our baby bird wings and fly away from the nest like a proud sparrow momma, but we faced different legal hurdles and compliance issues. It would be impossible to make global statements about what any single transition should look like. The only universal is to get the right people in your corner, so we offer you the right people.
From the get-go, we should mention that it may not be necessary to “find” the right people if you’re bolting-onto an independent firm. Your new company may have people on board or the blueprint already written for your transition.
Between us, we have extracted several dozen Investment Advisor Representatives (IARs) from their big company gilded cages and have all the tools in hand for a transitioning advisor. We offer transition support advisors and help new advisors prepare to succeed financially and psychologically. But many firms do not or do so anemically. Or if you’re opening your own firm, you won’t have those resources and thus will need a transition team.
Why can’t you do it yourself? Here’s how we think: If you wanted to build a house, you could, eventually. It would be costly, painful, and interminable. Still, after many false starts, inspection failures, teardowns and rebuilds, unexpected costs, mistakes, and frustrations, you might learn enough to assemble something resembling a house. The water would stay where you want it, and many of the walls would approach perpendicularity—if you don’t look too closely. The floors might squeak, but they would probably hold. But if you don’t plan ever to build another house, what good are all the painful lessons you have learned constructing this house? You will never be able to apply for them.
Instead, you hire people who do this for a living and have already navigated around the potholes, absorbed the painful lessons, and developed strategies that avoid the worst issues. Bringing in a contractor and subcontractors to do it right, on time, and on budget will allow you to live happily ever after, or at least until your children reach their teen years.
Keep in mind if you are bolting-on to a firm, many of these critical relationships will already be in place.
• Relationship Consultant with Your Custodian: Having an inside track on how to effectively work with your custodian(s) is very important. This is best achieved by fostering a relationship with your custodial representative(s).
• Compliance Attorney/Consultant: This is an absolute necessity. Trying to run a business without this person is a foolproof recipe for disaster. Interview this person carefully as they are all different.
• Transition Consultant: There is a tempo to transitioning effectively to becoming an independent advisor. In addition, there is a ton of data that needs to be managed when transitioning, and this person can help with that.
• Transition Support Team: These are the real worker bees of the transition. Having a great team to follow up on all the details will be invaluable.
• Business Coach: Not all advisors use coaches, but they should. If you’re not investing 10 percent of your revenue into growing yourself as a person, advisor, and leader, you’re selling yourself short. This is a mental game, and a good coach can help keep your game on point.
First, hire a lawyer or a transition coach as part of your departure plan. Have the lawyer review your employment contract and state statutes, and recommend a plan of action. Preferably, you use a lawyer who knows your state employment laws and FINRA rules. Most firms have contract language limiting when you can contact your clients. Some consultants and lawyers specialize by firm and by state. A guy in Arizona bills himself as the Schwab Killer, while another specializes in transitions from Edward Jones—and so on. (This is not an endorsement of any lawyer or individual transition coach; we’re simply giving you an idea of the playing field.)
Our lawyers drew up our letter of resignation on their letterhead so that the firm knew we meant business and had done our homework before leaving. Again, the goal here is to dissuade any legal action. They knew we had stocked up on the necessary shark repellent and would be formidable opponents if they attempted to interfere with our departure. (Carmine’s did regardless, to the regret of everyone but the lawyers.)
We recommend having a business coach who can help you navigate your swirl of emotions during the transition. World-class athletes and world-class advisors always have a coach. If you want to play at this level, so should you. There will be many during this process, and many will only interfere with your ability to withstand the pressures if you deal with them constructively. As noted, Daren runs, and Carmine meditates to let off the steam, but we both have coaches to help us let go of the negativity and focus on the positivity. (At least I’m not a Jets fan, thinks Daren. At least my team didn’t move to Las Vegas, thinks Carmine.)
Carmine’s attorney prepared him for all the potential issues that could follow his separation, and they all came to fruition. In that sense, he was like a meteorologist: he could predict the weather but couldn’t stop the rain. The transition consultant taught Daren the process of determining what to include and what to avoid when building his messaging. So those are the who’s—a lawyer/transition advisor and a business coach. It doesn’t hurt to have a supportive spouse and a spoonful of self-confidence, too, but the strength you derive from them is only helpful if you know what you’re doing.
One more note about preparing yourself mentally: There might never be a more helpful time for you to have an established exercise routine to assist you in releasing some of the stress. Carmine and Daren are both avid runners and spend time in the gym almost daily. In addition, we both had some preestablished meditation practice to help with those moments we found emotionally challenging.
So, now we have not provided you with any legal advice whatsoever but simply encouraged you, in a very nonlegal way, avoiding even a morsel of liability for your decisions, to hire the people who can guide you through your very individual circumstances that we in no way claim to understand (happy, legal department?). Let’s follow Daren’s transition consultant and head to the next step: the messaging.
We both spent the entire weekend announcing that we had started our respective firms. We had hundreds of clients remaining at the firm from which we departed, most of whom did one or two transactions with us. Our interactions were transactional, not relational, and given the size of our portfolio of clients, there was no way we could provide them with the level of service they deserved and that we considered minimally adequate. For the most part, we chose not to announce to these people; if we did, they were not of high priority. We don’t mean to be crass, but we understand that a single financial advisor cannot deliver high-quality, bespoke services and advice to six hundred customers.
Well, this topic is where the legal department does get involved. You are likely legally proscribed, prohibited, banned, restricted, and forbidden (have we made ourselves clear?) to announce anything other than the following: you are excited to announce that you are leaving your old firm to start your own, to deepen your relationship with customers and change the customer experience.
Period.
Again, what you can and cannot say is very state dependent. So, check with your lawyer first.
You are not permitted to solicit clients for the new firm. That will stir the legal demons and embroil you in a witches’ brew of trouble that could invalidate your new firm. You must adhere without a jot or title of variance to your employment contract, which almost certainly prohibits (and all those synonyms) you from soliciting business from the firm’s existing customers. That includes your best friend, your cousin (Vito in Carmine’s case; Tree Plumbtree in Daren’s; yes, Daren knows a guy by that name), and your sweet mother, who gave you life and then sacrificed for her welfare and never asked for anything in return.
A lawyer told us: “In connection with contacting clients, you are calling to announce your new affiliation only. You won’t ask clients to move with you as you are not allowed to solicit clients under your agreement with [the company]. However, two sentences … will be helpful to narrow the focus of the client to the issue of choice.”
The two sentences are: “This is a service industry. You get to choose the advisor you work with.”
Each employment contract is different, so be mindful of your statute of limitations on contacting clients.
We’re not your lawyer—you need one, but he won’t be us—so we’re not going to get into the weeds much more here, and we certainly don’t suggest you take any advice from us on legal topics. We want to offer this bit of nuance: while you may not solicit for a year after you leave, you may answer questions. Should a client inquire about whether and how they might follow you, with whom they have developed a relationship, rather than the faceless corporation into whose maw they will shortly be engulfed, that doesn’t necessarily constitute a solicitation. Your clients think, “My financial advisor is Daren, or Carmine, or [your name here],” not “My financial advisor is Company X.”
We remind you of this for two reasons. First, feeling optimistic about what you’re doing is emotionally healthy. You will feel comfortable rather than anxious and fearful about your announcements. Second, people want to be a part of a vision and be led by others; that leader might as well be you. Share the vision, tell the story, and expand their horizons and the story of a better tomorrow.
Each of us wrote a script in advance, but we didn’t read them word for word because reading a script can sound stilted and canned, the opposite of the feeling you want to create. You want the conversation to be friendly and natural. These are people with whom you have a relationship, after all. The script was talking points on steroids. Before we called, we considered all the possible questions clients might ask and prepared appropriate responses. The script’s purpose was to create one consistent set of messages for all the advisors doing the outbound calling that would steer us away from tripping over our tongues under duress, or worse, stepping on the third rail of solicitation.
Your message, no matter the finer details of your situation, will likely sound the same as ours. You will sketch out your vision for the future, assuring the listener that you are embarking on a new path that will lead to superior service and more investment options and eliminate conflicts of interest. Like us, you can explain what a fiduciary is and how you will always work in your client’s best interests.
That covers the script. You might have noticed what was not in our script and cannot be in yours:
• anything about your former employer
• anything about your dissatisfaction with them
• anything about the way they treated you
• any unethical demands they made
• any of the distorting incentives they offered
You will not explain to your clients the inside baseball details of the financial advisory industry and the plush junkets their continued patronage afforded you. Your message is entirely positive, forward-looking, and reflective of your vision of the future. It is focused on them and their financial well-being because the human spirit loves to be involved with a vision for something positive. You want your clients to feel like this is natural and good because they are about to face a hurricane of negativity—from the company you just left. Expect your former employer and her minions to do whatever they can to undermine you, your credibility, and your integrity. That’s where the positive attitude and psychological hardiness come in.
If there is one piece of advice we can give you, it’s to be positive and share your vision for a better future. People want to be a part of success; let them bring them into the vision for the future.
That brings us to the message. You have planned your exit, consulted lawyers, submitted your resignation, dotted your “I’s,” and crossed your “T’s.” Now, you are ready to make your big announcement to your clients. You do that like you did everything else—by having a plan. Having a “go” binder is a way to take a lot of the emotion of transition away; when the time comes, you execute.
The following is a punch list of items that could be in your “go” binder:
• Client Information: Client confidentiality is critical; only capture the information you’re ethically and legally permitted to possess regarding your clients, safeguarding their privacy and trust.
• Centers of Influence (COIs): The COIs you worked hard to establish should be on the top of your list. If you have shared clients, many of your clients will contact these COIs when they find out you have resigned to launch your own firm.
• Communication Plan: An orderly transition announcement list delineates the cadence at which you intend to inform stakeholders, ensuring a smooth and coordinated communication process during organizational transitions.
• Scripts: Scripts delineate permissible and prohibited language, guiding communication to adhere to legal, ethical, or professional standards in various contexts. Practice these before transitioning. Make them your words.
• Questions and Answers: A compiled list of anticipated questions with structured responses offers preparedness for expected inquiries, facilitating effective communication and mitigating uncertainties during interactions.
In our case, clients had questions, but they had more than that; they were excited about our message, which brought referrals! They were so energized by this new advisor-client arrangement that they thought of friends and associates who would also benefit from it and sent them our way. We received more introductions to potential new clients than we ever had prior. If clients were excited, professionals in related fields were thrilled. The CPAs, attorneys, and others who already understood what being a fiduciary is all about were most enthusiastic about our switch.
They did something even more remarkable: they demonstrated an extraordinary level of confidence by entrusting us with additional assets, seemingly indicating their readiness to fully commit to our partnership. In fact, because of this influx of new assets, despite having yet to take on a single new client for five months after securing his book of business, Carmine said he had his best year ever.
Those “why” conversations struck a chord with our clients that we didn’t fully understand existed. Believe it or not, many of your clients understand the conflicts of interest you operate under. They stay with you because they like you. When you leave, we often hear they are relieved to no longer question whether you work in their best interests.
The more conversations we had, the more positive feedback we heard, the more it reinforced our decision, and the less anxiety we had about each subsequent conversation. We don’t want to sugarcoat it: it was a brutal, emotionally draining endeavor. We took on a colossal challenge with plenty of ups and downs, and we learned a lot—including who our real friends were. But our clients were the best part of the process. Not long into the process, we began looking forward to each conversation as an opportunity to reconnect with the people whose futures we had been helping to shape. The conversations with clients were a ray of hope in the maelstrom of our lives. Years later, the glow from the very first moments of launching our new business have not worn off because we are doing right by clients who honor us with their business.
There will be a serendipitous side effect of this activity, writing a script and repeatedly engaging in this same discussion, each one a little different depending upon your conversation partner and the questions they ask: it will reinforce how you feel. Dozens, even hundreds of times, you will explain to others and remind yourself why it was imperative that you unlocked your golden handcuffs and escaped for a more promising and ethically defensible future. While caught in a whirlwind of emotions and uncertainty, your clients will reinforce your decision with their enthusiastic endorsement and support, or at least with their indifferent acquiescence, a measure of support. Clients who respond to your meticulously prepared messaging with a “yeah, whatever” are essentially demonstrating unqualified trust and deferring to your judgment.
Keep in mind: expect some surprises. Some people you are confident will stay with you will not—some people who you think won’t, will. The mantra “some will, some won’t, who cares, who’s next” will be important throughout this process. Just keep going.
This concept is not conjecture; we experienced this ourselves. Our psychological state at the outset of the change was generous and suboptimal until we began talking to clients. The conversations restored our faith in what we were doing, both because our message felt right and sounded true in our ears and because the conversations reminded us about how relationship based our work is. These conversations with people whose lives intertwined in ours, whose families we know, and whose welfare we care about and have sworn to promote—at least in the financial and, to some degree, psychological realms—buoyed our spirits and bolstered our self-confidence.
When the announcements began, we needed to put on a happy face and exude confidence to our clients. We were in “fake it ’til you make it” mode. However, after just a handful of meaningful discussions, the need for pretense vanished. We were genuinely exhilarated. This moment reinforced our dedication to weathering the immediate challenges, fully aware that more obstacles lay ahead on our journey. It solidified our commitment to persevere through the short-term pain, of which there was plenty more to come.
Our confidence was bolstered further by conversations with people in the know, in the industry or on the periphery, and with those COIs—the influential people we engage to help grow our businesses and whose businesses we refer individuals to. We are not the only professionals who rely on COIs to refer customers—real estate agents, healthcare advocates, estate planning attorneys, and consultants of all types also secure many of their clients through related professionals.
For financial advisors, those COIs include accountants, attorneys, personal lenders, trust underwriters, benefits specialists, mortgage professionals, marriage counselors, and more. All successful financial advisors dance to this tune because a single partner can account for dozens of new clients. These mutually beneficial relationships often grow beyond just business; they are personally and professionally fulfilling, satisfying, and enriching.
At this fraught juncture in the transition, we dreaded our conversations with our COIs. After all, we had worked with them under one set of conditions and were now calling to announce we were altering the unwritten agreement. These were generally knowledgeable people in our field who would not be easily swayed; we expected that selling our new arrangement would require more effort than it did with semi-engaged clients who trusted our judgment. These people had relied on us, and suddenly, we informed them that we were leaving our firm and striking out on our own. They would want to know what we had done wrong, why we had been let go, and what rule or law we had broken. And if our responses were unsatisfactory, we could lose not just one influential client but a funnel of new clients for the rest of our careers. There was a lot at stake with each of the COI conversations, so we were apprehensive about their tone.
To our surprise, there was nothing to worry about; they were the most straightforward. They weren’t the shortest but the most natural.
Our COIs were so supportive that they dismissed any concerns or objections. Most said something like, “It’s about time” or “Of course you left.” They were familiar with the conflicts of interest inherent in working for a big firm demanding sales of proprietary products. Several of them wondered how we had managed to hold out for so long. Most of them knew financial advisors who had taken the same step before and knew that life as a fiduciary was both more satisfying for the advisor and made for better referrals.
They were aware of our internal struggles with the ethical dilemmas confronting us; in fact, several of them told us that they liked referring to us precisely because we were resistant to the hard sell, that they could count on us to operate in the best interest of their clients. After all, it would reflect poorly on them if they referred someone to us who was dissatisfied with our service. No matter how friendly we are with our COIs, no matter how much the personal relationship enters it, this is ultimately a matter of business. No one in any profession can continue to refer clients to an unreliable COI partner.
So, did we lose COIs? We gained additional ones. More professionals in tangential disciplines wanted to join forces with us once we became fiduciaries. People get it. It’s like when you date someone none of your friends like, but they are all too scared to tell you. When you break up with the disliked individual, all your friends say, “It’s about time.”
Conversations with potential new clients began sooner than either of us expected in either of our situations because our COIs grew and widened. It hadn’t occurred to us that COIs are not only great for referring clients, but they can also refer to other COIs, and that’s precisely what happened when we moved to a fiduciary model.
Our pivot reminded our old COIs, friends, and informal business partners that there were others with whom they could connect us and that this would be a great time to do it. “You should talk to my friend Daren. He’s a great guy, and he just ditched the big firm to open his own shop as an independent financial advisor. That means if you use him as your financial advisor, he works for you, not for the insurance company or financial services firm. He can choose the best investment for you among all the options, not just among the options his company sells” is what we imagine our COIs told their colleagues. This advocacy is partly responsible for our ability to grow our book of business even in that tumultuous first year of the new operation.
It’s difficult to overstate the importance of the COIs to our business and the immense relief we felt when they were not only on board with our decision to strike out on our own but also actively encouraging it. We have been carving time out to meet for coffee or a meal, entertain at ball games and concerts, and share information with these people.
We’re scratching each other’s backs professionally and developing relationships. We had been sharing a piece of our vision with them prior to the breakaway, but afterward, we took the time to reconnect with each of them and paint the complete picture for them. Now that we have nothing to hide, the conversation is a lot smoother, not that we weren’t always being honest. We always tell the truth and nothing but the truth but perhaps not the whole truth. Now, we would be perfectly comfortable putting one hand on a Bible and swearing to do all three.
One of the most satisfying side effects of all this was something we did not do. For the first time in our careers, we were no longer required to walk our clients through the long, obtuse, arcane, lawyer-speak client disclosure form, acknowledging to our customers that we had an inherent conflict of interest. Both of us, independently, worked hard to minimize, if not eliminate, that conflict (otherwise, we might still be at the global conglomerate, cashing their checks and traveling on their junkets).
It’s different, though, when you don’t have to question your own motives constantly or limit your client to just the options available when you know there might be better ones in the marketplace. Going independent, eliminating conflicts of interest, and no longer having to read our clients’ disclosure forms is a bit like having knee surgery and no longer enduring pain when you walk. By eliminating the necessity of acknowledging potential conflicts, you forget quickly how happy you are to avoid this emotionally corrosive procedure unless you remind yourself every once in a while about the pain you aren’t feeling. Writing a book is an effective way to shake the memories loose, but it comes with plenty of its own agony, particularly if you’re as naturally gifted at writing as you are at, say, pole vaulting.
Consider what Carmine had to tell his clients when he advised them to purchase life insurance manufactured by his company. As we’ve said, there is nothing inherently wrong with this practice; in fact, these are quality products that might very well serve the best interests of the client. But when the company pressures advisors to sell more and more of these policies beyond the point where they are advisable, a conflict of interest is inevitable, even if no one acknowledges that it is the primary driver of this advice.
As a CERTIFIED FINANCIAL PLANNER™, Carmine was required to hand each potential client a “Conflict of Interest Disclosure Form” provided by the insurance company. Why? Because he was dipping his toe—and then his foot, ankle, and leg—into the muddy waters of conflict of interest.
Here is part of the Conflict of Interest form:
I have what some might consider to be certain conflicts of interest when I make an investment recommendation to you: I recommend products that [our company] manufactures. I can only offer securities products approved by [our company]. The universe of products I have available for recommendation consists of proprietary products in the case of variable annuities and variable life products. [Our company] believes that this singular focus assures that I have a developed understanding and ability to explain our proprietary variable annuity and variable life products and the financial strength of the guarantees that [our company] offers. My compensation depends in part on the volume of sales of products [our company] and its subsidiaries manufacture. Sales of products [our company] manufactures, along with mutual funds it does not manufacture, determine my eligibility for retirement, medical, and life insurance benefits and to attend conferences with educational, development, and recognition components. Qualification to attend [our company]-sponsored educational, training, and development conferences is based on my total sales of investment and annuity products, life insurance [our company] manufactures, and long-term care insurance.
What a relief to know that we won’t have to subject our clients to that again.
While you’re sticking to the script and remaining positive about your new venture, the lords of the financial realm will be unencumbered by such quaint notions as propriety and sportsmanship. They do not like being crossed or allowing anyone to feel as if they have triumphed against them. They have yacht payments to make, bonuses to brag about at the country club, and thousands of remaining advisors whose heads they do not want filling with dreams of sugar plums and happy separations.
On the contrary, they plant seeds of fear in every employee’s head and fertilize them at every opportunity, insinuating that anyone who leaves is guilty of treason, engaged in foul play, and will pay a hefty price for their heresy. Maintaining control of the great unwashed (even if they wear suits) is no different in a big corporate structure than it is in, say, the dictatorship of your choice—Russia, China, the NFL. The muckety-mucks do not suffer dissent or disloyalty gladly, and woe to those who attempt to speak truth to power.
We’re guessing the next chapter will be a revelation for you. But you should know what to expect so that you can be prepared to deal with every possible scenario.