Industry consolidation and frustrated brokers have left many families wondering if they should move their accounts to their broker’s new firm
Your phone has been ringing from your broker like never before. She’s not calling to talk about the market, or changes to your investments, but instead to tell you she is leaving the brokerage your account is at and wants you to move with her to the new firm.
If you have a current relationship, you might just need to find out a few of the details –the reasons she’s moving, what it means to your investments and fees, where her office will be – before making the move with her.
However, most successful broker / advisors will have many clients that they aren’t as familiar with currently; perhaps they did an IRA rollover for you several years ago, or you inherited an account from someone who had the initial relationship with her. You may not have spoken to the advisor for several years, and thought very little about the accounts you have with her company.
During the transition you are now likely to be pressured to move your accounts… and equally pressured by the current firm to stay put. You might feel under pressure, needing to make a quick choice you can’t be sure will be for the best.
By taking a step back from the situation, we can see who is truly in the driver’s seat and which side of the phone call the pressure is truly on.
So, here are a few thoughts to keep in mind for those in this dilemma to make sure whatever choice you make will be the right one for you:
You don’t have to do anything now – both brokers are likely to make this an urgent issue because whoever wins your business will receive ongoing income and probably a bonus for doing so. Since your fees pay that income, you are in the driver’s seat. You can move now, next week, next month, or next year. Urgent action is not required.
You have options –the move to the new company may or may not be your best option. There are plenty of reasons the broker is moving that are positive for you, and just as many that could be to your detriment.
The ideal circumstance is the services and costs at the new brokerage will be superior to those you currently receive.
On the other hand, if you would pay too much in transfer fees or new costs to justify the service you’re likely to receive, it may be that staying put is the best choice. If the broker is moving to a smaller firm with less pricing power, your fees could increase. Make sure there aren’t significant costs or increases in fees before making any moves.
Remember that you have options. Stay, leave, or it may even be the right time to do the research you’ve been meaning to in order to manage the account on your own.
You’ve got negotiating power – if you didn’t get enough service in the past, ask both brokers what they might offer. Annual check-ups on the account, or more comprehensive financial advice might be services that would benefit you. Meet with both advisors and find out what they will do to keep your business.
It could be one reason you hadn’t heard much from the old advisor is you were a small fish in their book of client accounts. Your account may be worth more to the new advisor to justify their spending more time on you. Take the time to find out what’s in it for you with both advisors.
Find out the reason for the change – while it is impossible to know for sure, it is in your interest to find out why your broker is leaving.
A common reason brokers change firms is sales requirements; this might be either that they are not meeting sales goals, or that they feel pressured to sell certain products. Obviously, you would prefer if your advisor didn’t feel pressured to sell you products that weren’t in your absolute best interest.
One of the other possibilities is the move is to avoid the nuisances with how their firm requires they conduct business. This could mean the advisor was annoyed at compliance oversight, or new rules they didn’t feel were best for their clients.
Obviously, as the prospective client, you’re going to hear the change is in your best interest, and you can never know the real reasons behind the switch. However, having some idea of reasons why the change might be happening can help you develop questions to ask during your conversation.
Ultimately, you may not experience much of a change in your accounts staying or going. But, knowing you don’t have to make this a priority simply because it is for your account suitors can help remove the pressure from your talks and give you the time to think through which change will benefit you most.