Quantcast

What to Expect When Your Broker Leaves


Shutterstock photo

Investment professionals move with some frequency between and across financial firms, such as brokerage firms, investment advisory firms and insurance companies. In addition, investment professionals may leave the financial industry entirely. These changes may prompt customer questions about the departing professional and the status of their accounts following the departure.

FINRA has consistently sought to ensure that customers can make a timely and informed choice about where to maintain their assets when their broker leaves a firm, and recently released new guidance about how firms from which a broker is leaving should communicate with the broker's customers.

The guidance recognizes that brokerage firms' different business models give rise to different approaches to managing customer relationships, and that the expectations regarding how a firm handles a departing broker will vary accordingly. For instance, the departure of a broker who works closely with customers in a one-on-one relationship may be handled differently than the departure of a broker who is part of a team in a customer advisory center model or a group service model.

Firms have flexibility in reassigning customer accounts and communicating with customers about the reassignments. But, FINRA believes they should provide timely and complete answers, if known, to all customer questions resulting from a departing broker, so that customers may make informed decisions about their accounts.

Communications with Customers

FINRA's guidance provides that customers should not experience an interruption in service as a result of a broker's departure. FINRA understands that decisions about the reassignment of customer accounts, if applicable, are typically made promptly following the departure of a broker. In the event of a broker's departure, FINRA expects that the firm will have policies and procedures reasonably designed to assure that the customers serviced by that broker are aware of how the customers' account will be serviced at the firm. This would include how and to whom the customer may direct questions and trade instructions following the broker's departure. And, if and when assigned a new broker at the firm, that information also is expected to be conveyed to the customer.

In addition, FINRA's guidance states that a firm should communicate clearly, and without obfuscation, when asked questions by customers about the departing broker. Consistent with privacy and other legal requirements, these communications may include, when asked by a customer:

  1. Clarifying that the customer has the choice to retain his or her assets at the current firm and be serviced by the newly assigned broker or a different broker or transfer the assets to another firm; and
  2. Provided that the broker has consented to disclosure of his or her contact information to customers, providing reasonable contact information, such as phone number, email address or mailing address, of the departing broker.

The guidance further notes that FINRA does not expect a firm to seek to obtain the departing broker's contact information if not known by those responsible for reassigning and continuing to service the account (for example, the branch supervisor responsible for reassigning the customer account or newly assigned broker) at the time of a customer's question. As with all communications with customers, information provided by the firm about the departing broker must be fair, balanced and not misleading.

So what does mean for you as an investor? If the broker you are working with makes a change, don't hesitate to contact the brokerage firm and ask questions. In addition to the new guidance, FINRA rules also require that when a broker moves from one brokerage firm to another, the brokerage to which he or she moves must deliver an educational communication to former customers who are contacted about transferring their assets. Framed as five questions, the document highlights important conflict-of-interest and cost considerations of transferring your assets to a new firm. It also encourages customers to make further inquiries to reach an informed decision about whether to transfer assets to a broker's new firm.

Subscribe to FINRA's The Alert Investor newsletter for more information about saving and investing.

FINRA is dedicated to investor protection and market integrity. It regulates one critical part of the securities industry - brokerage firms doing business with the public in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org .

Photo Credit: ©iStockphoto.com/NicolasMcComber



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.





This article appears in: Personal Finance , Financial Advisor Center



More from Finra

Subscribe







Contributor:

Finra













Research Brokers before you trade

Want to trade FX?