How Does a Stock Broker Fire a Client?
Relationships between clients and businesses sometimes need to be terminated. There can be many reasons, but in the brokerage business, it is usually the stock broker that gets fired -- often for poor performance. Interestingly, there are also times when a client needs to be let go. The brokerage business is a highly regulated and sensitive one. The account representative is charged with fiduciary responsibilities many other business owners are not, so ending a client-broker relationship with a client needs to be done with care.
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Bad Clients
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It's not often we hear of brokerage customers being fired. Clients can be "bad" for a number of reasons. Registered representatives (RRs) are "business owners" and should aim to successfully grow their books of business. Hopefully, they provide a good service, but there are times when clients don't fit the profile for the level of service the RR seeks to offer. There are other times when clients simply will not follow the advice of the RR, or the client requires too much service or even displays bad behavior. If the relationship sours, both parties will suffer. You may not want that business.
Document All Conversations, Activities and Transactions
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Document everything. Risk doesn't just apply to the potential loss of money in an account. It also applies to the risk of a claim or lawsuit should something else go wrong. If phone conversations are not recorded, be certain to make extemporaneous notes of their content. Include as many details as possible and note whether activities and transactions, including deposits or withdrawals of funds, are recommended or not -- "solicited" vs. "unsolicted" -- by you. In the event something goes wrong, these documents are invaluable. They are also one of the first things industry regulators will request in an inquiry should one arise.
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Discuss the Account with the Branch Manager
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Bring your concerns to the attention of your supervisor, whether the branch manager, the compliance director or whomever. As the person who supervises your activities, his name is also on the account documents that the client signed. He has as much interest (and responsibility/liability) in this matter as you. Outline your wishes to him. Perhaps he will have some alternative ideas to either help salvage the account relationship or dispose of the account.
Discuss the Relationship with the Client
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If the relationship with the client is still open enough to have reasonable, productive discussions, arrange a meeting in which your concerns can be addressed. If a personal meeting is not possible, arrange a time when the concerns can be aired -- without interruption -- by phone. If needed, come to a conclusion, whether to end the relationship or not. There may be a chance it can be resolved, but ultimately that's up to the RR.
Irreconcilable Differences
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If the account relationship cannot be worked out, there are a number of courses the RR can follow. First, the account can be assigned to a different broker at your firm who is willing to service it, or it could be assigned to the "house." If the client is a potential "lawsuit-waiting-to-happen," this might not be advisable. Next, you could diplomatically suggest that the client would be better served elsewhere -- provide references, if possible. A third, more subversive, alternative is to increase the commissions or fees, making it attractive to the client to transfer the account elsewhere. Most importantly, there are things you cannot do, such as unauthorized transactions that involve liquidating the account/issuing certificates, sending the proceeds to the client and closing the account without approval. But, thinking creatively, there are several more possibilities. Proceed cautiously and -- again -- be certain to document all details.
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