Sep
10
2009
Timing Your Transition
Financial professionals seeking to change their broker dealer affiliation should carefully consider the effective date of their transfer. After Labor Day, we begin to (understandably) get more questions about whether a Rep/Advisor should transition now or delay their change of broker dealer until next year. Unfortunately, the answer isn’t a simple one and making a correct decision depends a lot on the individual circumstances of the Rep, their clients and their current BD.
As you are probably aware, FINRA fees and state registrations are paid on a calendar year basis. This means that if you switch broker dealers at the end of a calendar year, you will have to pay most of your licensing fees again in January. Similarly, some Reps pay E&O premiums on a calendar year schedule. So if you’ve pre-paid many of your expenses this year, it may make sense to delay your transition until January. But if your revenue will more than offset those charges, making a move now may be prudent.
Another factor is paperwork management- that is, when is the best time for you to make your move? We have assisted Reps with transitions in every month of the year, and I can only say that there is no “right time” for everyone. For example, we’ve had accountants make the switch at the end of the year, wanting to be done with the process before tax season. But we’ve had other CPAs who transferred in January, knowing they would see their clients during tax season and could have the necessary account forms signed at that time. So whatever works for your situation is the way to go.
You will also want to check the timing of any quarterly payments you receive, such as fees from advisory accounts and 12b-1 trails. It’s best to time your transition soon after you are paid, thereby giving yourself the maximum amount of time to complete the account transfer process. If you receive a large payment in January (typical for fee-based accounts), you’ll probably want to transition in the fourth quarter.
Finally, FINRA closes in mid-December for the remainder of the year. Therefore, if you wish to transition in the beginning of January (an obviously popular month), you should have your licensing documents submitted to your new broker dealer by December 1st at the latest.
