How to cope with seismic shifts in the sector

The financial turmoil at Merrill Lynch & Co. and Lehman Brothers Holdings Inc. has turned Wall Street upside down. The crisis is also spooking Main Street. Here are some answers to questions about how all of this affects you.

Q. If Merrill Lynch is my stockbroker, should I be concerned?

A. While the nation's largest brokerage has struggled, Bank of America Corp., the nation's largest bank by deposits (with about $800 billion), is acquiring Merrill. The deal is expected to shore up Merrill's finances.

Q. Takeovers can cause chaos. Is my money safe with Merrill?

A. Yes. But there could be disruptions as the companies themselves reorganize or consolidate offices. Merrill or Bank of America brokers, or others, for example, may leave for other firms or be laid off when the two companies are combined, and that may cause some confusion for customers.

Q. Since Lehman filed for Chapter 11 bankruptcy yesterday, how will that affect my account?

A. The bankruptcy applies to the corporate assets but not customers' personal investments, which are held in trusts.

What's more, Lehman's US broker-dealer subsidiaries are excluded from the bankruptcy filing, which involves the firm's investment banking and trading operations, according to the Financial Industry Regulatory Authority, a private regulator.

But there will be an impact on Lehman's brokerage and mutual fund customers. Their accounts with Lehman Brothers Inc., the brokerage firm, and Neuberger Berman, its mutual fund company, will be transferred to other firms.

In a statement, Lehman said its mutual fund unit "will continue to conduct business as usual," and the firm is talking to potential buyers for its brokerage and investment operations. Boston private equity firm Bain Capital was among the bidders last Friday. Terms of the bids have changed, however, a person briefed on the situation said, because Lehman is now presumably looking to sell the entire company, not just part of it.

"If you're an account holder at Lehman, you just ask as many questions as you can and take nothing for granted," said David Beckwith, chief investment officer for Rinet Co., a Boston financial firm.

Q. So, should I pull my money out of Lehman?

A. While regulators are overseeing the process, customers should consider moving their money to another firm, said Robert Lutts, president of Cabot Money Management, an investment firm for wealthy individuals.

Even though their investments may be safe, he expects customers could have short-term problems such as difficulty transferring or withdrawing money.

If customers decide to leave Lehman, they should do thorough research on the financial stability of their new company. "This is a time to be cautious and conservative," Lutts said.

Q. Is the Securities and Exchange Commission doing anything to protect consumers' investments?

A. Bankruptcy filing by such a large Wall Street firm is unprecedented, and federal regulators are taking extraordinary steps to protect Lehman's retail brokerage and investment customers.

The SEC has sent staff into Lehman to ensure that customer accounts are protected and to prevent the parent company from taking money out of the retail investment division and transferring it into other business accounts.

"Lehman Brothers' customers will benefit from their extensive protections under SEC rules," the agency said yesterday. When Drexel Burnam Lambert filed for bankruptcy in 1990, the SEC also transferred customer accounts to rival Wall Street firms.

For more on how to protect your investments, check out the website of the Financial Industry Regulatory Authority at www.finra.org.

Q. What about local regulators?

A. Secretary of State William F. Galvin, Massachusetts' top securities regulator, said his office has been hearing from investors who own Lehman stock and who are upset about their losses. His office will look into whether the stock was sold inappropriately, but it's most likely, he said, "just a bad story of loss."

Q. How safe are my investments in mutual funds and discount brokers such as Fidelity Investments, Vanguard Group, and Charles Schwab & Co.?

A. Mutual fund investments are safe, because these firms have not been directly affected by the problems stemming from Wall Street's investments in money-losing mortgage securities and related investments.

But investors in stock funds tied to the housing or mortgage industry may see losses. Diversified stock funds may also take a hit because companies such as General Electric Co. or General Motors Corp., which have large financial units, may also experience declines, and global markets are also roiling because of the concern around the world about the US economy and financial system.

Q. Will I have trouble with my mortgage?

A. No. Anyone who keeps paying their mortgage won't have any problems. And at a time when mortgages are going into default at a record rate, clients who make their payments are strengthening the system.

The federal government's takeover and promise to infuse up to $200 billion in mortgage giants Fannie Mae and Freddie Mac last week calmed the loan market and pushed down rates on 30-year fixed mortgages more than half a point.

Rates may fall further as more investors buy bonds, which drives rates down.

But if the nationwide credit crunch worsens as a result of Wall Street's continuing problems, it may become more difficult to obtain a new mortgage or get a home equity loan.

"The liquidity and the stability of the practice of mortgage lending is teetering," said Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association. "We've got to level the ship."

Q. What's going to happen to my stock investments?

A. The Dow Jones industrial average plunged 504 points yesterday, or 4.4 percent, to close at 10,917. The market is in a period of extreme uncertainty and is expected to continue to be volatile in the coming weeks. Investment advisers said it could take time for investors to regain confidence, despite the government's efforts.

Kimberly Blanton can be reached at blanton@globe.com, and Beth Healy can be reached at bhealy@globe.com. Jenifer McKim of the Globe Staff contributed to this report.