Broker Check

Jericho Office

500 North Broadway,

Suite 251A
Jericho, NY 11753

What if my account is orphaned?

May 16, 2019

According to an article written for InvestmentNews that states that many firms have been cutting service to smaller accounts in order to reduce costs, thus creating an orphaned account. Orphaned accounts are accounts that were originally set up by a broker/advisor, and that broker/advisor is no longer active on the account or in industry jargon the broker of record. There are many reasons that this may happen, but here are some of the most common reasons:

  • The broker/advisor is no longer appointed with the company: The primary reason for no longer being appointed would be not doing enough additional business with that specific investment or insurance company.
  • The broker/advisor is no longer in the business: Unfortunately, our industry has a lot of attrition; especially in the 403(b) market, where brokers/advisors are typically brand new to the business. As a result, many do not stay in the business or use it as a stepping stone to move into another position at another firm.
  • Your account is with a captive company: It is very common for the larger investment houses/companies to make their employees captive brokers/advisors. Thus if they ever leave their firm, the clients stay with the company. As a result, they don’t have to pay the broker/advisor to service the account. These accounts may be left dealing with an “800 service center number” to call into if help is ever needed.
  • The broker/advisor has passed away: Unfortunately, most financial accounts are set up with a single point of contact. When a broker/advisor passes away, the investment company may have no other choice but to turn the account into a house account. In some cases advisors who pass away have partners that can take over their accounts. At NXT Phase Financial we have continuity agreements in place to enable a smooth transition.
  • You don’t meet the company’s minimums for investments: Recently many large brokerage firms have adopted a policy to only provide brokers/advisors to individuals that have balances over a certain amount of money invested. This amount is typically $100k, and if you fall short of that amount you may end up having to deal with a customer support center versus being assigned to an advisor.

A big issue that we solve at NXT Phase Financial Services is adopting “Orphaned” accounts. So, what happens if you are either an orphaned account or just feel like you have been orphaned? Here are a few options depending on your situation.

  • Assuming you want to keep your current account as is, we can call and see if you can add a new direct contact representative to your account. This is what my firm does with many orphaned accounts, we run into. If the investment still works for the client or it is too costly to exit the product, we simply become the agent of record, and then we can help the client without any changes or fees to them.
  • If you are unable to add an advisor of your choice, keep your account as is. Perhaps the company can assign someone to your account.
  • Liquidate and move the account to a firm where you can actually have a financial advisor that you can meet with if you have questions.

If you have an orphaned account or just feel like you have been orphaned after you purchased a product, contact our office and we’d be privileged to look into it and let you know what your options are.