What if My Broker Changes Firms?

There are many reasons why brokers switch firms. It's a normal part of the business, but you will want to know why.

I once met a couple whose broker was changing firms for the second time in three years, moving from a national firm to a regional one. They worried about the small firm but wanted to keep the broker.

Whenever a broker changes companies, do a fresh background check on the new firm and the broker.

A broker's record can be sullied quickly, so get current details. Just because the broker was clean when you started working with her doesn't mean things have stayed that way.

In this case, the couple had never done a background check on their broker. He explained that he had left the big firm for a pay raise and less sales pressure. A background check uncovered problems, however, notably several complaints concerning the suitability of his choices for older couples. That was enough to convince the couple not to follow the broker.

If you end up following your broker, find out if he or she gets a bonus for bringing over new customers. Also find out who pays any transfer fees for the securities or whether you might incur taxes because you'd be forced to sell some investments to change firms. If you choose not to follow the broker, you will have to start the interview and background-check process over again with a new advisor who works for the old firm.

By Chuck Jaffe
Chuck Jaffe is a senior columnist and host of two weekly podcasts at MarkWatch. He has also been a guest speaker on several television and radio shows.

Copyrighted 2020. Content published with author's permission.

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