What To Do If My Financial Adviser Is Out Of Business (Part 2)

what to do if my financial adviser is out of business

It’s true that financial advisers go out of business. They may face a financial crisis and operational challenges which may render them irrelevant over time. They may also go out of business after the decline of the certain product or product provider that they were leveraging on. It might also be that the issuer of the index the adviser invests in went out of business hence causing the adviser to go out of business too.

If your advisor goes out of business, your best bet lies with a third party custodian. In the event your adviser goes out of business, you could approach the custodian and request them to sell the securities in your account. Alternatively, you can initiate a process of transferring your securities to another firm. Altogether, there would be no problem whatsoever if you take any of the options especially when you had invested in a popular index fund or an Exchange Traded Fund.

Photo Credit: cnbc.com

Photo Credit: cnbc.com

What this implies to prospective clients is that you should always weigh in the possibility of your financial adviser getting out of business beforehand. You should act in prudence. One of the ways you could exercise prudence and due diligence is by evaluating your financial adviser’s viability through indicators such as:

  • Availability of financial backers
  • Rate of growth

Financial advisers who score well on the rate of growth are in a good place to attract financing if they would require additional financing. Thus, it minimizes the possibility of the financial adviser going out of business. On the aspect of financial backers, it is quite important for your financial adviser to have deep-pocketed backers. This again lowers the possibility for the adviser to go out of business in the first place.

If the inevitable happens, then it’s time for you to move on. You could consider other alternatives such as changing your adviser. Organise meetings with other reputable financial advisers. Your current adviser should understand that you are looking out for yourself and your investment. He/she should exercise patience.

While meeting up with new advisers, it’s important for you to negotiate on fees. Have many alternatives as possible so that you acquire a strong position in any negotiation. Let each financial adviser provide a full disclosure of fees. Of importance, let them narrate their strong points and what they would supposedly bring to the table in order to win you.

You should be cautious enough so as to avoid getting back to the same position you’re in; that is; choosing a financial adviser that is out of business. Hence exercise extreme caution. The key aspects you should focus on in your search for a new adviser should be:

  • The performance of the prospective financial adviser should be outstanding. You should be able to see positive results on their records.
  • If the fees are high then it ought to be commensurate with the returns you will get from investing with them. Otherwise, do not pay if you don’t see any value for money.
  • Individual attention. The important aspect here is communication. They should call, text or even mail you regularly to update you on your investment.

After it’s evident that your financial adviser is out of business, first act to secure your investment and thereafter look for another alternative financial adviser.

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