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Fidelity, Wells Fargo, Merrill Top List of Firms for Account Closures

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A new report by Cogent Research has found that 13% of affluent Americans closed at least one investment account in the last year, a figure that Cogent says is more than double the pace reported in the previous five years.

The main reasons for closures: Investors cite consolidation, rollovers, fees, or a need to access funds. According to Cogent’s 2010 Investor Brandscape report, among those who closed accounts, 15% reported closing a Fidelity Investment account, 11% closed a Wells Fargo/Wachovia Securities account, and 10% closed either a Merrill Lynch or E*Trade account. (See chart below for percentage of investor account closures by distributor).

The net result, Cogent says, is that the total number of accounts dropped from 3.54 per household in 2009 to 3.29 accounts in 2010. “Providers have long known that they would need to step-up their game if they hoped to keep their fair share of the billions of dollars in retirement assets about to become un-tethered,” said Meredith Lloyd Rice, Senior Research Director and author of the Investor Brandscape report, in a statement. “Well, the game is not only on, the competition just got tougher given that fewer accounts are up for grabs.”

The report is based on a nationally representative survey of 4,000 American investors with at least $100,000 in investable assets.

Some of the top reasons for closing accounts include:

  • About one in five (18%) investors who closed an account last year did so because of a desire to consolidate or simplify accounts;
  • 14% said their actions were the result of moving or rolling over retirement assets to another provider;
  • 12% cited either fees or the fact that they needed the assets for another purpose.

The report also notes that “the proportion citing rollover activity as their reason for closing an account doubled last year compared to the previous five years, and the proportion citing a need to access account funds tripled.”

Says Lloyd: “These numbers are a result of a confluence of events. With Boomers retirement now hitting full stride, economic conditions forcing some investors to liquidate accounts, and an all-out price war among several key distributors, investors certainly have plenty of good reasons to reevaluate their current account options.”