If you’re thinking about whether to follow your broker or stay with your current firm, it’s a good idea to examine key issues that will help you make an informed decision. A good relationship with your broker is surely valuable to you, but it’s not the only factor in determining what’s in your best interest. Before making a final decision, talk to your broker or someone at your current firm about the following questions, and make sure you’re comfortable with the answers.
Could financial incentives create a conflict of interest for your broker?
In general, you should discuss the reasons your broker decided to change firms. Some firms pay brokers financial incentives when they join, which could include bonuses based on customer assets the broker brings in, incentives for selling in-house products or a higher share of commissions. Similarly, some firms pay financial incentives to retain brokers or customers. While there’s nothing wrong with these incentives in either case, they can create a conflict of interest for the broker. Whether you stay or go, you should carefully consider whether your broker’s advice is aligned with your investment strategy and goals.
Can you transfer all your holdings to the new firm?
What are the implications and costs if you can’t?
Some products, such as certain mutual funds and annuities, may not be transferable. If that’s the case, you’ll face an additional decision if you follow your broker to the new firm: whether to liquidate the non-transferable holdings or keep just these holdings at your current firm. Either way, there could be costs to you, such as fees or taxes if you liquidate, or different service fees if you leave some assets at the current firm. Your broker should be able to explain the implications and costs of each scenario.