One day, you are notified that your financial advisor is not going to be around anymore. Your advisor has left for another firm, is changing careers, is retiring, or has passed away. What do circumstances like these mean for you? Here is a look at how some scenarios may unfold and how things may differ depending on whether the financial professional works independently or as a registered representative of a brokerage firm.
Some investment professionals move on to new brokerage firms. The grass may be greener at Firm B instead of Firm A, so your investment professional decides to leave Firm A for Firm B. At that moment or soon thereafter, Firm A may notify you that a new investment professional is being assigned to your account. That person could be entirely unfamiliar with your account and your goals, however. The danger is that your account may become an “orphan,” a so-called “house account” with no one actively overseeing it.
You may also receive a notice from Firm B and your longtime investment professional, asking you to transfer your invested assets over to Firm B. In this scenario, you must weigh a few factors; some of them may be hard to evaluate right away. There will be costs to move the invested assets from Firm A to Firm B, if that is your choice. (Some of the assets may not be transferable.) Firm B may offer you somewhat different investments than Firm A has offered. Could the move strengthen the level of service your investment professional has provided or weaken it? Again, some of this may be hard to initially discern.1
Sometimes financial advisors decide to retire or change careers. In the case of an investment professional working for a brokerage firm, the brokerage assigns a new representative to your account and notifies you of the change, à la the second paragraph in this article.
If you have a relationship with an independent financial advisor, a different scenario will likely occur. Your advisor will probably tell you the change is coming months in advance and introduce (at least in writing) the new financial professional who will oversee your account. Typically, this is someone who has worked alongside your advisor at the same small, independent financial advisory firm – perhaps, someone your current advisor knows, trusts, and has possibly “brought aboard.” Every effort is made to sustain and further your relationship.
What if an independent financial advisor becomes seriously ill or dies? Hopefully, a transition plan of some kind exists. If the advisor personally manages client portfolios and determines their asset allocations according to investment strategies, then someone must take over those responsibilities. If a suitable successor has yet to be found, then a supervisor or partner at the firm needs to assume that role in the meantime.
If the independent financial advisory practice mostly outsources investment management, the transition may be less of a crisis for the client and the business.
If a registered representative working for a large brokerage company dies or becomes seriously ill, then his or her accounts may be temporarily or permanently assigned to another registered representative as the situation warrants.
An advisor’s departure is not the end of the world. When a change occurs and a relationship with a new financial professional begins, that does not imply that there will be a poor rapport between advisor and client or subpar investment performance as a result. Few people retain the same financial advisor for decades. Change is a part of life, the markets, and the financial services industry.
Greg Ferguson may be reached at 952-406-8316 or email@example.com.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
1 – finra.org/investors/highlights/5-questions-ask-when-your-broker-changes-firms [11/7/17]