How should I handle switching firms?

QUESTION: I am thinking about making a switch to a new firm, but I am afraid that if I leave without a plan, then I will not be able to finish the transactions I have and get paid. I plan to approach my broker-in-charge soon and discuss how I feel, and I have a lot of questions. Can my clients choose to leave my current firm? If so, what forms can I use? Is there a way I can work on my existing transactions and move to my new firm?

ANSWER: You are absolutely correct that a good plan is essential to ensure compliance with the Code of Ethics, License Law, and other important things like your independent contractor agreement (if you have one). It might not be possible to make a smooth transition, but here are a few considerations that may help both you and your BIC navigate this situation should you choose to make a change.

First, you should understand that your current firm has likely invested a lot of time, effort, money, and energy into developing you as not just an agent, but an asset to the firm. Sometimes these investments are not apparent or visible to you, but they are there. A good place to start would be to examine where your current clients came from. Did they come from the firm? Is your firm the party to the agency agreement, or are you?

In most circumstances, even if you bring clients to the firm from your own efforts, the client ultimately signs the agency contract with the firm and you sign on the firm’s behalf (and not your own). This means they are the firm’s clients and not yours if they sign one of NCR’s standard form exclusive agency agreements, and the clients cannot leave the firm unless the firm permits them to do so. It also means that Article 16 of the Code of Ethics would bar you from interfering with your firm’s exclusive agency agreements. We wrote a Q&A going into detail on this topic here.

Second, you should carefully read your independent contractor agreement if you have one. A well-drafted independent contractor agreement will cover this scenario and provide a roadmap. If you do not have an independent contractor agreement that covers this situation, then you can propose several solutions regarding your current transactions, but your firm has no obligation to agree.

Some solutions to consider are:

1. 1. If your new firm and current firm agree, you can dually affiliate with both firms to close out existing transactions and begin practicing at your new firm.
   2. If your current firm, new firm, and clients agree, you can have the clients sign agency agreements with the new firm, terminate the existing agency agreements using Form 720 (Termination of Agency Agreement and Release), and then finish the transactions with the new firm. Ensure as part of this process that any cooperative compensation agreements are maintained with any cooperating firms, if any. You may also negotiate paying your current firm a referral fee, which may be documented on Form 730 (Referral Agreement).
   3. You and your current firm may agree that you will no longer work your existing transactions, the clients will not move with you, and you will be paid a negotiable amount once the transactions close. The License Law allows you to be paid by either your existing BIC or a previous BIC.

There is not one right way to change firms, and these potential solutions are just suggestions. Note that these solutions should first be negotiated with your current BIC rather than the clients. As noted above, the clients likely belong to the firm. Discussing your departure with clients first not only potentially runs afoul of the Code, it may present other legal liabilities, such as tortious interference with contract and misappropriation of confidential business information.

Hopefully, if you decide to leave, you and your BIC will be able to negotiate an exit that works for both of you and fosters a relationship where the ability to cooperate is maintained. If you cannot, however, then you and your BIC may need to seek legal counsel to be advised how to proceed.

Release Date: 05/29/2025

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