Office Leases for Financial and Wealth Advisory Firms

Most of an office lease is the same for any tenant. Financial firms have three additional concerns. Clients visit to discuss private matters, so the experience of arriving and meeting counts. Customer records must be protected, and the physical office is part of that. And many firms grow through hiring advisors or acquiring books of business, or change ownership through succession, so assignment and expansion rights matter more than they do for many other small tenants.

This guide does not cover what your firm is required to do as a regulated entity. That depends on your registration, and your compliance counsel should confirm it. It covers how to make sure your lease and your space do not get in the way.

Decide first how often clients really come in, and who sees them. An advisory firm that meets clients in person most days should think about space differently from one that mostly works by video or visits clients at their own offices.

• Arrival. Consider lobby security, directory listing, suite signage and whether clients can park or reach the building easily.
• Privacy. Think through how a client gets from reception to a meeting room without passing screens, files and other client meetings. Soundproofing around meeting rooms deserves its own line on the plan.
• Discretion. Some clients prefer a quieter address. Others expect a prominent one. Your clients' expectations should set the priority, not a generic idea of what a financial firm should look like.
• Condition. A dated suite can undercut the message even where the building is fine. Ask what the landlord will fund to fix that.

One advisory firm described the outcome it wanted when its lease was coming due:

Two SEC rules are worth bringing to the conversation with your compliance counsel, since they apply to many firms and bear on the physical office.

• Safeguards. Regulation S-P (17 CFR 248.30) requires covered institutions, including SEC-registered investment advisers and broker-dealers, to maintain written policies addressing administrative, technical and physical safeguards for customer information, and to take reasonable steps when disposing of it.
• Books and records. Rule 204-2 (17 CFR 275.204-2) generally requires SEC-registered advisers to keep required records in an easily accessible place for not less than five years, the first two in an appropriate office of the adviser. The same rule allows electronic storage if stated conditions are met.

These rules change, and they do not cover every firm. State-registered advisers, and firms with other licenses or exam requirements, need to check what applies to them. We are not your compliance advisor, so use this as a prompt for that conversation. Bring the answer into the lease negotiation, because a lease can support or undermine your written procedures.

• ✓Who has keys or access cards to our suite, including the landlord, the cleaning crew and contractors?
• ✓Does the lease require notice and an escort for non-emergency entry, and can we designate restricted rooms?
• ✓May we install our own access control, cameras and alarms, and must we remove them at the end of the term?
• ✓Where will paper records be kept, and is there a locked records room or do they go offsite?
• ✓Does the building offer secure shredding, or do we need to arrange it ourselves?
• ✓Are network closets or server rooms inside our premises, with locks we control?
• ✓If we share a suite, reception or copier with another firm, how are records kept apart?
• ✓Would a fire, flood or building outage keep us from reaching records, and does the lease give us rights if it does?

Advisory firms can grow in steps. A team joins, a book of business comes over, or two practices combine. Space that fits today can be tight quickly, and leasing too much in advance is expensive. Instead of paying for space you may need later, look for rights that give you options.

• Expansion. A right of first offer or first refusal on adjacent space, or a must-take with a set date if growth is already planned.
• Contraction or termination. A right at a fixed date helps if an expected team does not arrive or a large advisor leaves, usually with a fee tied to unamortized costs.
• Assignment. A sale, merger or internal succession can trigger the assignment clause, especially if ownership changes count as a transfer. Ask for a permitted transfer carve-out for a sale to a successor firm that meets a stated financial test, and strike any landlord right to recapture the space or take a share of sale proceeds.
• Guarantees. If an owner gives a personal guarantee, plan how it ends when that owner retires or sells. Without a release mechanism, a retired principal may remain liable for a business they no longer run.
• Subleasing and shared use. Ask whether independent advisors or affiliates may share the suite, and on what conditions. Many landlord forms restrict this.

If you might sell your firm during the term, tell your attorney before the lease is signed. A buyer's diligence will read the assignment and guarantee clauses, and it is much easier to fix them now than during a sale.

Financial firms tend to value continuity, and moving costs clients' attention as well as money. That makes staying attractive, and landlords know it. Even a firm that plans to stay benefits from knowing its alternatives, and even a fixed renewal rate in the lease may be worth testing. Start early enough that you can credibly move, since a landlord that knows you have run out of time has little reason to negotiate.

If you are downsizing or merging, see whether your landlord would take a replacement tenant directly, which can release you entirely, rather than leaving you as sublandlord. This is not always possible, but it is worth asking for at the outset.

TAG represents tenants and buyers only. For financial firms, that means we bring options to the principals, keep the search confidential where required, and work alongside your attorney and compliance lead on the terms that bear on their areas.