Realistic Measures: Identifying What’s Portable and What’s Not

A process by which advisors can assess what is “really” portable when considering a move.

Advisors considering change have many things keeping them up at night, from deciding on the right firm, whether a move even makes sense, how a new platform stacks up, and of course, portability. Having invested one’s business life faithfully serving clients and growing a book of business, advisors certainly want to bring along as much as is possible – and practical – to their new firm.

In representing thousands of advisors in transition, we found that creating a realistic portability goal is critical. This metric serves as a foundation for developing the business case for transitioning, assessing the likelihood of hitting any backend bonuses or earnouts, and setting proper expectations.

It’s a process that consists of four key steps:

Step 1 – Determining your metrics

Portability percentage is most often expressed as those assets under management recaptured at a new firm. Even though this is a relatively straightforward metric, it tells only a fraction of the story. For example, using AUM as the primary metric would fall short for an advisor who purposely leaves behind $100mm in transactional assets generating only $10k per year in revenue. Since most advisors are compensated as a percentage of their revenue generated or a proportion of profits, using percentage of client revenue transferred may be a more telling statistic. In other cases, judging a transition’s success on the percentage of relationships moved may be more appropriate.

Desired portability metrics are often achieved in 4–6 months, so evaluating a transition’s success too early may not tell the whole story. ?

Step 2 - Setting a reasonable baseline

Although every advisor dreams of moving 100% of their book, this can be an elusive goal. Remove non-portable assets from the equation—like alternatives invested via feeder funds, proprietary products, institutional business tied to the current firm, or assets tied to a split rep-code where you are not the primary. Additionally, many successful teams strategically decide ahead of a transition to “shrink to grow”—leaving behind certain business (i.e., institutional or transactional clients, or accounts below $1mm investable) to focus the business and prospecting efforts on their ideal client profile post-transition.

Step 3 – Adjusting for your specific circumstance

Since no two books of business are identical, it makes sense to honestly assess your business and the environment in which you are practicing.

Assess how the clients were sourced. Was the book built by the advisor’s own prospecting efforts or assembled via referrals from the institution? We see this often in the case of Private Bankers or bank-based advisors whose clients are often “owned” by the bank and not the advisor. Typically, self-sourced books that are serviced by the advisor will transfer.

Evaluate the nature of post-employment restrictions with legal counsel. Are there restrictive covenants in the employment agreement? Transition data has proven that whether a move is “Protocol” or “Non-Protocol” has little impact on portability (when legal counsel is followed closely). However, garden leave, non-competes, or longer-term non-solicitation clauses may slow asset movement.

Complete a mapping of the current book to a new platform. Does the new firm have a similar manager platform? Are managers and products priced competitively? What about matching securities-backed loan rates? No two platforms are the same. Expect some breakage but limiting change for clients is certainly preferable.

Build the case for why a move is better for clients. What are the benefits of a new firm or platform to the client? How does a move remedy their pain points? How can you ultimately serve them better? A strong client narrative making the case for “what’s in it for them” will positively impact portability.

Step 4 – Judging your portability

The truth is, there is no universal “good” portability rate since every book of business is different and has its own set of characteristics that may influence asset capture.

From our own transition data, advisors departing traditional brokerage firms tend to move 85-95% of desired assets within the first six months. Independent advisors who own their books outright typically realize 90–100% portability. But for Private Bankers or advisors who have been fortunate enough to build a book via bank referrals or as relationship managers, a “good” portability goal might be closer to 25–30%.

Ultimately, bringing over a business to a new firm is important, but assessing what is “good” starts with you first—and nobody else.

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