Experts suggest that when you transfer an account in-kind from another firm to your own you’ve got a six-month grace period to win over that client’s confidence. After that, any holdings not doing well are your fault; not the fault of the previous advisor who actually made the recommendations.
So, when transferring an account do you hang on to the holdings or turn them immediately to cash? That’s difficult to say because every situation is different. It’s certainly not as easy as 1,2,3.
“If I’m transferring money in because the client’s advisor is retiring or isn’t giving him or her the support and advice they require and they want to move with me and I look at the portfolio and there’s quality stuff in there, I’m not going to make any changes,” said Kitchener advisor Mike Gentile. “At the end of the day we’re going to preserve what’s there – the integrity of the structure. I think all good advisors will do exactly that.”
“We’ll manage on a go-forward basis,” Gentile added.
And it cuts both ways for advisors.
“Just recently I had a situation where I looked at an account that transferred out [to another advisor] not in-kind but in cash. And there were two funds that were doing extremely well. I eventually reached the individual and I said, ‘Hey listen, I’m curious to know. We’re going to move the assets as if you were happy or unhappy, whatever the case may be, why would they have transferred them in cash?’ The holdings were all performing well and following a solid investment structure,” said Gentile. “I ended up having a conversation with the client shortly afterwards and he said ‘the bank wanted to sell me their proprietary products and if you want this loan you’re going to have to do this, this, and this.’”
“They forced the issue on him.”