The first inkling that the financial world you have comfortably inhabited is about to be disrupted is a phone call. Your financial advisor is on the line telling you she is thinking about changing employers and asking your opinion on such a move. Or, it's an unfamiliar voice from the firm where your investment account is held, calling to say that your advisor has left. Sometimes, you make the call and hear a recorded message stating that your advisor has left the firm and directing your call elsewhere in the firm.
Given our world of mobile employees, sometime during your investing career you are likely to encounter the advisor-changing-firms experience. If this happens, you have an important decision to make about your financial future. There are basically three choices to consider:
As soon as your advisor resigns, someone from your current firm will be in touch asking you to stay with the firm and become his client. Even if you plan to transfer your account, it's worth listening to the pitch before making a final decision. Find out what enticements are on offer if you stay. Ask for a review of your accounts and some recommendations. This is a good way to assess this advisor, and get some potentially good ideas for your account.
You should avoid agreeing to stay at your current firm until you have taken stock of your existing advisor. Have your investments performed well? Do you trust her? Are you happy with the client service?
Your advisor is likely to contact you immediately after changing firms and suggest that you move your account to her new firm. If you are interested in continuing the relationship, you should meet with the advisor. This meeting will be an information-gathering session. You should prepare a list of questions in advance and bring your latest account statements.
Here are the main matters you will want to discuss:
Why did the advisor move? Often, it's for greener pastures -- more money, a more prestigious firm. There could be dissatisfaction with the current firm due to such factors as product line-up or commission schedule. Perhaps there was a personality conflict with the branch manager. Most firms will pay advisors who transfer a "transition bonus" to compensate for the risks involved in moving to a new firm.
Is the new firm of similar quality to the incumbent firm? Are you comfortable with the new firm? Moving from one bank-owned brokerage firm to another should not be an issue. If the new firm is a smaller, independent broker or you don't recognize the name, you will need to investigate the firm before signing on.
Does the new firm sell all the investment products of interest to you? Does it offer the services you want? Things like online trading privileges, a flexible fee schedule, account statements with detailed performance reporting and quality research material.
What information is included in the new firms' account statements? Ask to see an example.
Is your account invested in any proprietary products? These include wrap programs that would have to be sold if you moved to the new firm. If so, what are the costs and tax implications of selling these investments and what replacement options are available at the new firm?
What is the process for transferring your accounts and what will it cost? There will be forms to complete to set up your new accounts and others to initiate the transfer of assets from the old firm. Transferable investments are sent electronically without any sales taking place, so there usually aren't any tax implications. The old firm will levy transfer fees in the vicinity of $135 per account. The new firm should offer to reimburse these fees.
How long will it take for my investments to arrive at my new account(s)? Transfers typically take seven to 10 business days from the time the transfer form is received by the old firm. Your advisor will not have access to your account during this period. For most investors, this is not a concern. However, if you are an active trader, you will need to do some planning or deal with someone else at the old firm in the interim.
If all your questions about moving your account are answered to your satisfaction, then your best option is to follow your advisor to the new firm. But, before signing on, take the time to resolve any issues with your current relationship. For instance, you may feel a fee reduction is in order, based on your account size or trading activity. You will never have a better time as a client to negotiate changes.
Sometimes the best decision is not to follow your advisor. Your choice then is to either become a client of the new advisor the firm has assigned you or conduct a search for a new advisor. Both involve some effort to complete due diligence on the new advisor and time to establish a trusting relationship.
If you are forced to go through an advisor-changing-firms experience, take the time to consider your options before deciding what to do. Avoiding a rash decision is likely to produce the best outcome to this unavoidably stressful event.