By John Drachman
When most people leave a job, a company’s assets stay with the firm. Not so in the asset-based world of financial services. For many firms, seeing one of their advisors walking out the door can be like watching money fly out the window.
On average a firm can lose up to $2 million in revenue every time an advisor changes shops. For the client, there are primarily two choices: either stay with the firm or accompany their advisor to the new place.
Either way, this is no time for a thinking client to stand still. It’s important to know why your advisor is switching. In most cases, the move will be prompted by the advisor’s hopes of enjoying a fatter payday. In other cases, the desire to be more independent is the prime motive.
One thing you can count on: Your advisor will want you to come along for the ride. Before making a commitment though you will want to understand the circumstances that led to the advisor’s decision. To get the big picture, don’t hesitate to ask some pointed questions:
- “What prompted your decision?”
- “Will any of your staff be accompanying you – or are you going alone?”
- “Would you detail the tangible benefits I gain from moving my account with you?”
- “Will anything about my fees and cost change at the new firm?”
- “What happens to the fees I’ve already paid you for the most recent quarter here?”
- “If I moved, would I have to liquidate any of my investments?”
- “Were there outstanding professional or personal issues with your ex-employer?”
- “Are you violating a non-compete agreement?”
- “What happens to me if you have to fight your way through a legal proceeding?”
After receiving answers to those questions, keep going: The Financial Industry Regulatory Authority, Inc. (FINRA) offers a free tool called BrokerCheck to research the background and experience of financial brokers, advisors and firms. Also, reach out to the advisor’s former firm to detect how civil the split really was. While you’re there ask about the process they have for keeping you on board and assigning you to another advisor.
“Overall, the decision to stay or go is completely personal,” says Jeremy Torgerson, a financial planner with nVest advisers, LCC. “Remember, the adviser left for a reason, and almost always because the move would be better for the adviser, not you.”
“If you have a good, personal relationship with the adviser,” he continued, “it might be worth the expense to maintain a relationship that you know and trust.” On the other hand, staying with the advisor’s former firm means that your account will be reassigned to an advisor you’ve never met.
John Drachman is a contributing writer to www.myperfectfinancialadvisor.com, the premier matchmaker between investors and advisors. John is an IABC award-winning writer, who applies his 30 years of financial marketing experience toward advancing the dialog between investors and investment professionals.
