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Not Just About the Past: Financial Advisors Must Also Focus on New Firm & Deal

Joshua Iacuone

Financial Advisors rightly seek legal help in navigating the departure from their current Firm, whether Protocol or non-Protocol, about solicitation, compensation / Notes, and U5 issues.  It is shocking, however, how unfocused Financial Advisors are about the finer deal points (i.e., other than the financials – frontends/backends) and legalese for the new Firm.  Often, Financial Advisors will hire IMcP’s FINRA and Financial Advisor lawyers to guide them through the treacherous departure process, while not even alerting IMcP’s FINRA and Financial Advisor lawyers about the specifics of the new Firm’s deal, much less have it reviewed and revised.  This is a mistake. 

As the saying goes: an ounce of prevention is worth a pound of cure.  The same concerns and anxiety about leaving the current Firm, such as forfeited compensation, how much of the Note must be paid back, garden leave, etc., should be addressed on the front-end with the new Firm to avoid those same concerns and that same anxiety again if the Financial Advisor chooses, or is forced, to make another move.

For instance, will the new Firm pay legal expenses if the current Firm institutes litigation? Will the new Firm agree to different terms related to forfeiting deferred compensation?  Will the new Firm agree to changes in calculating how and when forgiveness attaches to a Note?  Will the new Firm agree to fairer terms and definitions in the offer letter, including what constitutes “cause” or “retirement.”  What if the new Firm is in the Protocol, which is a necessary condition of your accepting employment, but later leaves Protocol on little or no notice – can you “grandfather in”?

IMcP’s FINRA and Financial Advisor lawyers have over a decade of experience in negotiating with new Firms, gauging the level of “leverage” the Financial Advisor has to extract more concessions, and knowledge of the current “market” terms (i.e., legal protections) for the Financial Advisor’s “asks” of the new Firm.  Typically, the new Firm wants the Financial Advisor as much as the Financial Advisor wants the new Firm, so Financial Advisors must use that leverage at the beginning during the “honeymoon” negotiations with the new Firm.

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