Moving your entire block of client accounts from one custodian to another could become an overwhelming task unless you plan effectively for the transition.
The services and support provided by custodial firms impact almost every aspect of a Registered Investment Advisor's business. Adding a new custodian for future accounts is relatively easy as your staff has time to learn the new custodian's processes and procedures gradually as new accounts are added. Replacing one custodian with another is much more involved, even for a small firm.
We'll skip the reasons for a wholesale change in custodians, but every advisor would agree that such a decision is never made lightly. Once the decision to move has been made, there are three important steps to insure a smooth transition: Communicating the change, establishing new accounts, and finally the transfer of assets. For a smooth transition, it all comes down to timing.
Communicating the Change
Send a letter to all clients the month before you anticipate having the application packages ready and explain your reasons for making the change and outline the process (establish new accounts, transfer assets in-kind, close old accounts). In the letter:
A week before the packages are ready, call or e-mail all clients and ask if they want overnight delivery of their forms or to make an appointment. Be sure to ask if they want the delivery carrier to require a signature or leave in the doorway. Remember that these forms contain enough information to really cause an identity theft problem if they fall into the wrong hands.
When your packages are ready, write a brief instruction memo explaining the purpose of each form and whether the client needs to attach anything such as a copy of a trust agreement or a voided check.
Once the new accounts have been established and verified, send an e-mail reminding clients of the blackout period and then deliver all the ACATs to the new custodian at one time. If you are holding back a few accounts to avoid fees from your current custodian, remember to hold back those ACATs.
Begin with the date that you want all client assets to be available for trading on the new custodian's platform. You will work backward to determine implementation dates for the other tasks. There are several important issues to consider in setting this date:
Next Billing Date: You will want to be able to complete your next billing on one platform so if you bill at the beginning of a month or a quarter, you'll want assets to transfer after the fees are collected or well before the next billing date.