When an investment advisor decides tomove on and another firm acquires theirclients, the switch can place an investoron shaky ground. These corporate takeovers happenrather frequently. For example, this past SeptemberMerrill Lynch acquired the financial firm AdvestGroup, based in Hartford, Conn, and in FebruaryAmerican Capital Strategies purchased Atlanta-basedFinancial Asset Management Systems.
Mark Soehn, principal and managing director atthe Financial Solutions Advisory Group (FSAG),points out, "Last March we completed an acquisitionof the client base of a fee-only, registered investmentadvisor based in Indiana. Our acquisition has gonesmoothly, and the clients understand that they nowhave access to a greater number of services, a morediverse group of wealth managers who are familiarwith a wider range of investment offerings and strategies,and better and more frequent communication."
FSAG suggests that the acquiring firm needs to goout of their way to offer the same level of service, oreven greater. Conversely, the consumer has to ask theappropriate questions to discover if they want to dobusiness with the new firm. Most people don't likedisruption, especially when it comes to the managementof their money, so the process could be painstaking.To simplify things, FSAG created the followingchecklist to help consumers decide if they want tostay with their new firm:
•Don't rush to sign on. Take the time to make athoughtful decision whether to continue your involvementin this new situation. Soehn recommends thatyou meet with the principals of the firm so you knowwho you'll be working with and if you agree with theirmethods. "You should feel comfortable with the advisorsand how they operate before you swing yourhard-earned assets over to their camp," Soehn advises.
•Determine if your former advisor is still inthe picture. What impact will your previous firm'sadvisor have on your new situation, if any? Also, willthey be your primary point of contact at the new firm,or, if they decide to retire, will it be someone new?
•Consider the new firm's location. While thelocation of the new firm may not be a big deal for someconsumers with today's communication technology,others may prefer to have their advisor close to home.
•Examine the acquiring firm's operations.Your new firm may handle your account differentlythan it was in the past. FSAG suggests that you makesure the firm's approach to your account is in linewith the type of service that you need.
•Look at the acquiring firm's client base.Check if the firm is dealing with clients who have afinancial situation similar to yourself. You can speakwith current clients to determine the type of servicethey're receiving and choose if you want the same.
•Clarify the payment structure. Your newadvisor could be a fee-based advisor, who chargesfees plus commissions, or a fee-only advisor, who justcharges a percentage of the assets they manage withno commission. Make sure this point is clarifiedbefore you begin working with a new advisor.
•Perform an independent check on your newadvisor. Visit the Web site for the Securities and ExchangeCommission at www.sec.gov/investor/brokers.com and click on "Research Investment Advisors"then "Investment Advisor" search the name ofthe firm you wish to investigate. Use this site to confirmthe firm's reputation.Ensuring a smooth transition to a new financialfirm rests as much on your shoulders as it does yourinvestment advisor. As Soehn explains, "If a clientfails to ask the right questions, the probability of havinga hard time making the transition will be great.Communication is the key."