Peter Dunn: Your financial adviser is changing firms. What now?

Hi Pete! My financial adviser has recently left his firm and is going out on his own. I am 62 with plans to retire at 65. While I really like him and feel that he has done a great job with my investments, I’m a little leery to move all my money to his new business. He will be under one of the major investment companies, but it makes me feel like I will be starting over (kinda). I haven’t met with him yet to discuss if I will be following him, and I wondered what your thoughts are and if you could offer any good questions I could ask him to help me make my decision. Thank you!

—Mary

During my freshman year in high school, a young love interest of mine promised me she would call me on a particular evening. Staring longingly into the stormy darkness, I waited for the phone to ring. It didn’t.

I was devastated. I lay awake all night bemoaning what could have been. I slinked into the school halls the next day waiting to catch a glimpse of the one (of many) who shunned me. I saw her. She saw me. She walked directly toward me and told me her neighborhood lost power in the storm the previous evening, which is why she didn’t call me. In that moment, the power of love was restored.

Filling in the gaps of uncertain situations often yields unnecessary heartache. Based on what you’ve shared about your adviser’s departure, I wouldn’t assume the worst.

Let’s start with a beautiful possibility: Your adviser might want to charge you less and provide you with enhanced investment offerings. No, seriously; it’s a thing. If the firm he’s currently working at has rigid fees and limited offerings, he might decide he can build a bigger, better business without those two choking restrictions. If that’s the case, which it commonly is, you both can win big time.

Or, let’s say his current manager shares a different set of ethics, and your adviser doesn’t feel he can continue to subject himself or his clients to that misalignment.

If your investments are in individual stocks or various types of funds, your adviser shouldn’t necessarily be quick to want to alter those investments. The reality is, he likely constructed your portfolio, and no matter who signs his paycheck, his investment philosophy shouldn’t change because of it. However, if he does plan to move your investments around after he transfers your account, that would be concerning. It would be especially concerning if this resulted in additional fees, whether they’re surrender fees or new purchase fees.

There are certain instances in which an adviser switches firms because they were induced by a signing bonus, which comes in all different forms. Does this hurt you financially? Not necessarily. The new firm is essentially buying future fees. Theoretically, you’re paying fees no matter what, so you wouldn’t necessarily care whom you’re paying them to.

I think sometimes people forget that business relationships are still relationships. If you don’t want to be treated like a commodity (finance joke), don’t treat him like a commodity. Treat him like a person who, like you, benefits from candid communication.

Here are some questions you should feel 100% comfortable asking: “Congrats on the big news; what led to this decision?” “How will my investments change after you change firms?” “How will my fees change?” “What pushback have you received from your other clients?”

If his answers don’t pass the sniff test, ask for clarification. If things don’t feel clearer, maybe your fears were warranted. If you like the firm your adviser is leaving, seek out an adviser from that firm. But the reality is, this boils down to a simple question: Why is your adviser leaving? It’s a fair and simple question, and it requires a fair and simple answer.

As always, spend 10 minutes running a quick BrokerCheck and review Indiana criminal and civil complaints that your adviser might have incurred. It’s not unusual for a terminated adviser to simply hang a new shingle at a new company. That being said, termination isn’t even in the top 10 reasons why an adviser would leave one firm for another.

I appreciate your heightened awareness around malfeasance, but from what I’ve witnessed, changing firms is rarely an act of malfeasance.•

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Dunn is CEO of Your Money Line powered by Pete the Planner, an employee-benefit organization focused on solving employees’ financial challenges. Email your financial questions to askpete@petetheplanner.com.