Do your diligence when switching firms

By Noushin Ziafati | May 13, 2024 | Last updated on May 13, 2024
4 min read
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In April, Laurentian Bank reached a deal to sell the assets of its retail full-service investment broker division to iA Private Wealth Inc.

As part of the transaction, some 30 advisors at Laurentian were invited to join iAPW.

In that case, the advisors couldn’t stay with Laurentian. But top advisors are frequently approached by other firms offering them incentives to switch.

No matter the scenario, experts say advisors should thoroughly evaluate a transition offer and prioritize their clients’ experience if they decide to switch.

Read the offer carefully

Advisors should carefully assess all aspects of a transition offer — such as compensation, compliance requirements and culture at a firm — to ensure it is in line with their wants and needs, said George Hartman, president and CEO with Market Logics Inc. in Toronto.

“I would treat it as any other transaction where you would apply a full measure of due diligence to determine if it’s right for you, if it’s right for your clients,” he said. “I wouldn’t rush into it. Take as much time as you have available. Dig deep on everything.”

Research the organization’s culture, values, reputation and philosophy concerning the way products and services are offered, Hartman recommended.

Compliance requirements are important to consider as well, he said, noting advisors should look through a transition offer to get a better understanding of ownership at a firm, along with any non-compete clauses, recommended fee structures, or specific products and services they are expected to offer to clients.

As for compensation, Hartman encouraged advisors to estimate their practice’s value and then determine whether the proposal aligns with their expectations. He also encouraged advisors to read any retention clauses that may be included.

Pay attention to payment conditions

Advisors should carefully review the payment conditions in a transition package, as there can be a lot of them, said Joe Millott, founder and principal of Acquatio. The Toronto-based company works with advisors to grow their businesses through mergers and acquisitions.

Advisors may receive an upfront cash offer in the form of a signing bonus or a forgivable loan in a transition offer.

There are fewer conditions to upfront cash offers, but an advisor may have to repay some of the money if they don’t stay at the firm for a certain amount of time, Millott said. A forgivable loan, meanwhile, is a way to get cash upfront and ultimately pay it down with tenure and performance.

However, forgivable loans are becoming “less and less attractive in today’s environment” of higher interest rates, he added.

Advisors should also weigh performance-related payment conditions. They should find out what would happen if they do not deliver on expected revenue growth at a prospective firm, as well as what would happen if they were to exceed those expectations.

And if an advisor is being offered compensation through shares in a company, they should find out the price at which those shares are being issued and whether there’s potential for appreciation, Millott said.

“Ultimately, the whole [payment] structure needs to be taken into account,” he said. “Are you getting fair value for your practice, and does this really recognize the value that you’ll be creating for the firm you’re joining?”

Risks associated with transition offers

Clients do not always follow an advisor when they are switching firms.

To mitigate the risk of losing clients, Hartman recommended remaining in frequent communication with them leading up to a transition and going above and beyond to address their needs.

“Communication is good continuity of service,” he said.

Millott emphasized the importance of building a personal brand and making the value of one’s services clear to clients.

“Anything that you as an advisor can do in the run-up to a transaction to help cement the perception … from the client that they are working with you and not with the firm you currently sit with is extremely important,” he said.

But advisors should be careful about what they share during a transition as some firms or dealers have “very prescriptive, non-compete, non-solicitation agreements” that could bar an advisor from communicating the details of a transition to a client, Millott said.

He pointed out that switching firms could present an opportunity for advisors to part ways with clients who don’t fit the future direction of their practice.

“That frees you up to do more of the marketing and business development with the group of clients you really want to work with,” Millott said.

Cover your bases

Advisors should speak to other advisors who have switched firms about their experiences and ask themselves what would happen if switching firms doesn’t go to plan, Millott said.

“What are your exit pathways? What would need to happen if you had to unwind this? What would be the mechanism for doing so? What would you need to pay back? Are there any adverse tax consequences?” he said.

Millott also advises people to come up with a three-year forecast before making a move.

“Will I be better off doing that move? Will I be worse off? Let’s assume maybe 20% of my clients or 10% of my clients don’t come. Let’s have a little stress test there and see what the outcome would look like.”

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Noushin Ziafati

Noushin has been the associate editor of since 2024. Previously, she worked at outlets including the CBC, Canadian Press, CTV News, Telegraph-Journal and Chronicle Herald. Reach her at