The Broker Protocol for Recruiting allows advisors seeking to move firms to compete against their current firms and to take certain clients with them (even if their employment agreements contain noncompete or nonsolicit restrictions) provided that all of the requirements of the protocol have been satisfied, including the fact that the advisor’s current firm and new firm are both signatories to the Broker Protocol at the time of the transition and the advisor takes only five pieces of information about each client (including the client’s name, address, phone number, email address, and account title).. Nonetheless, advisors often have certain misconceptions about what the Broker Protocol allows them to do during their transition. In this article, we will highlight some of the most important misconceptions we’ve seen when advisors talk about the Broker Protocol.

First, the Broker Protocol does not necessarily allow an advisor to take all of his or her clients as part of the transition process. For instance, certain clients that are serviced by the advisor as part of a team (but not brought or developed by the advisor) may not be solicited by the departing advisor unless the departing advisor has been part of the team in a producing capacity for at least four years. Separately, some firms that join the Broker Protocol limit the applicability of the Broker Protocol and carve out certain situations where the Broker Protocol will not apply. For instance, some firms state that advisors that receive clients as part of an advisor’s participation in a retirement transition program from another advisor may not invoke the Broker Protocol with respect to those inherited clients.

Second, the Broker Protocol does not explicitly permit advisors to take employees with them to their new firm. Restrictions on solicitation of employees are not eliminated when an advisor attempts to make a Broker Protocol transition, and, in fact, if the advisor takes employees constituting a significant enough amount of headcount or representing a significant amount of firm assets, the advisor could be accused of corporate raiding and face a lawsuit from the firm from which he or she is leaving.

 Therefore, whether you are joining another firm or moving to independence by establishing your own RIA firm, advisors should proceed cautiously and consult experienced counsel when planning their transitions to determine which clients can be solicited by invoking the Broker Protocol.

For another article discussing common mistakes to avoid when making a transition, click here.

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