Breakaway registered investment advisors in the financial industry are professionals who leave a larger firm to set up their independent practice. While making the move can offer greater autonomy and potentially more lucrative opportunities, it also raises ethical and legal concerns surrounding the topic of poaching. Poaching refers to improperly taking clients from the old firm to the new independent venture.
Understanding the boundaries when setting up a new firm is crucial for any breakaway RIA, as failure to adhere to the guidelines can result in severe consequences. Before taking any actions to set up an independent practice, you should carefully review any existing contractual obligations you may have with your current employer.
Non-compete and non-solicitation clauses are commonly included in employment contracts and may stipulate conditions under which you can or can’t take clients. Violating these terms could lead to legal repercussions and damage your reputation in the industry.
Respect the client’s wishes
Ultimately, the decision to follow an advisor to a new firm rests with the client. Being transparent about your move and its reasons is essential, but avoid aggressively persuading clients to make the switch. Best practices dictate that you inform clients of your new venture only after your departure from the existing firm is official and only if you’re legally allowed to do so.
Successfully navigating the transition to a breakaway RIA involves balancing fostering your new venture and respecting existing legal and ethical obligations. Understanding and carefully adhering to anti-poaching rules is essential for avoiding legal trouble and maintaining trust and integrity in professional relationships.