Easing Advisors' Transition to Independence

For wirehouse advisors, going independent offers plenty of appeal. Making that move can give advisors more control over key facets of their practice, from the back-office setup to how they work with clients day-to-day. But there are challenges to moving clients and their accounts to the new firm.

Fortunately, advisors don’t have to manage these transitions alone. GS Select offers securities-based lending to advisors and their clients. And while advisors can use this program to help their clients open new lines of credit, they also can rely on GS Select during these transitions. In fact, GS Select was designed to address one difficult but crucial piece of the transition puzzle: assisting advisors through the process of moving wirehouse clients who have active loans against their investment assets. “Advisors want to bring their clients over to their new firm, but the clients can’t move until their loans are paid off,” says Debbie White, head of GS Select Transitions, a specialized team within GS Select. “Focusing on this part of the transition is a large part of what GS Select does.”

Speed matters

It’s a common Catch-22 for advisors: They don’t want clients to have to liquidate positions and repay those lines of credit just to follow the advisor to a new firm. Nor do they want to leave their clients at the wirehouse simply because of an outstanding loan balance. In these cases, GS Select can help by paying off the client’s existing line of credit and establishing a new loan at the advisor’s new institution.

That solution sounds relatively simple, but the execution can be considerably more complicated. White says the process has to happen quickly, often in a matter of days. Yet some lenders may require a time-consuming underwriting process that involves reviewing a client’s tax returns and financial statements. By contrast, GS Select’s origination flow is entirely digital, and its underwriting process is automated. That streamlined approach means approvals can happen in minutes, helping to keep advisors’ complex transitions on track.

“It’s all about timing,” says White. “It’s about how quickly we can pay off these lines of credit and how quickly these assets can arrive at the new firm.”

The benefit of experience

Pricing is another item at the top of advisors’ lists of concerns about transitioning clients with active securities-based loans, says White. Advisors want to confirm pricing for their clients prior to the break. To that end, GS Select aims to match the spreads of the client’s existing variable rate.

And each wirehouse has its own particular—and sometimes peculiar—rules governing how securities-based loans are repaid. The GS Select Transitions team’s deep experience with wirehouses and custodians means they’re intimately familiar with how certain firms handle variables such as advance ratios and payoff terms. That knowledge, says White, helps keep the transition process from being derailed by unexpected issues. “So often, advisors are ecstatic to know that we understand how the process works at the institution they’re leaving,” says White. “Our experience makes the whole transition go more smoothly.”

That experience is bolstered by a suite of digital tools in the GS Select Advisor Portal, which gives advisors full visibility during every stage of the Transitions process. The Advisor Portal offers transparent views of every facet of a client’s line of credit, from outstanding balances and current interest rates to advance ratios on every holding in their portfolio. White says this transparency was critical for advisors who were in the midst of a transition during the extreme market volatility in early 2020. “When assets arrived in a tight position, an advisor could see a live view of the client’s holdings and make real-time decisions about certain holdings to avoid a margin call situation,” she says.

The right team for the right job

Breaking away from the wirehouse environment can be difficult. By partnering with GS Select Transitions, advisors gain an experienced, dedicated ally to help negotiate the challenges of moving clients with active securities-based loans. “The success of an advisor’s transition often is contingent on this process happening quickly,” says White. “Our goal is to make it as efficient and transparent as possible so the advisor can continue their move toward independence.”

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