Merrill and Lehman Customers

I started my day with our firm's emergency early morning meeting to address the current financial crisis. Our firm's principal, John Ferguson, called the meeting to provide his thoughts about the current state of affairs and prediction for today's market action.

With 30+ years in this business, this isn't the first crisis John has seen and weathered through with clients. I, too, have had my share of panic management as an advisor during the noted "Black Monday" back in 1987.

We've been on the phone with our clients all day. Many are very concerned, and rightly so. Recent actions by the nation's largest financial firms are indeed unprecedented. No one knows what further bad news is yet to be uncovered. I'm betting we'll see at least one more day of severe market declines as the reality of this news works through the market.

With the market closed now, I wanted to take a minute to pass some of our insights to my blog readers.

To those of you with assets held with Lehman, Merrill, or any other commission-based organization, we offer the following suggestions:

1. Review your account for the bonds or stock of the brokerage firm holding your account. Very often in these accounts we see that brokers have purchased assets invested in their own company. In this market, clients may be holding Merrill/Lehman securities that ultimately will have little to no value and/or liquidity.
2. Don't expect your broker to tell you that you own the above securities. Even the very best brokers often won't bring these issues to light in the midst of such market events.
3. Immediately contact your broker to discuss plans he/she has for accounts if he/she chooses, or is forced, to leave the firm.
4. Do not purchase any A share mutual funds. Brokers may try to sell these high commission products to generate temporary, short-term commission income for themselves or the firm.
5. Be wary of proposed sales of assets in individual accounts as these will create taxable events. However, tax implications should not completely drive investment decisions - i.e. if there is a good reason to remove the asset from your portfolio (i.e. it's invested in a failing firm), then sell no matter what the tax consequence.

Call us if you have any concerns about the allocation or fees related to your current portfolio. Wouldn't you rather put your trust in an independent firm that has positive cash flow, financial liquidity, thiry years of fee-only experience, and a reputation for serving the client above self?