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Your money is your money. It’s what you use to carve out the life you want to live for yourself, and you have every right to control the flow of it however you want. Switching financial advisors can be just one more necessary money step to ensure that you feel great about your finances. Follow these steps to help make sure that the switch goes smoothly.
Breaking up doesn’t have to be hard to do.
If your financial advisor has underwhelmed you and find the fees a bit high, you might prefer using a robo advisor. These are services that automate your asset allocation using computer algorithms (in large part, incorporating Modern Portfolio Theory).
Some robo advisors, including Betterment and M1 Finance, incorporate human assistance to help you with stuff like taxes, retirement or estate planning. Or if you aren’t sure about robo advisors and want to stick with a financial advisor, check out Farther. With Farther you get the benefits of a customized portfolio, daily rebalancing, and a dedicated fiduciary advisor.
Transferring certain types of accounts, like proprietary funds, may take a while. You should follow up on the transfer after two weeks to make sure that everything got where it needed to go.
Another nice thing to do, depending on how long you were with your first advisor, is to send them a personal note about the switch. It doesn’t have to be long or particularly in depth. A simple email stating why you’re making the switch and thanking them for their work is a nice touch that will go a long way. It can sting a little bit to lose a client, so end things on good terms with a short, personal note.
Depending on the company or firm you’re with, your leaving experience may look different from other people’s. With some firms, all you need to do is to put in writing that you want to leave and that the relationship is dissolved. With others, things like annual service fees or termination fees might need to be negotiated or flat-out paid.
Here are some things to think about, and steps to take, as you make the switch.
Before you leave, review any paperwork or contracts you have signed — There’s probably information in the contract on how to leave the partnership, so start there. Be sure to check for fees. Do you have to pay the annual fee if you leave partway through the year? Is there a sales fee or a transfer fee associated with any of your investments? These are all things you can ask your current advisor before you start the process. And sometimes, your new advisor is so happy to have you as a client that they will pay the transfer fee.
When you leave your old financial advisor, they’ll have to transfer your financial records to your new one. So before you pull the plug on any relationships, make sure you’ve got a new advisor all set up. We think Paladin Registry, an advior registry that can match you with an advisor is a great place to start. Or you can use this advisor finder from SmartAsset.
On that note, really review your new advisor. You’re leaving your old one for a good reason. Talk in-depth with your new advisor to see what kind of plan they’ve got for you, as well as the tax implications of their plan and the switch, and make sure that your new advisor is all set up to accommodate the types of accounts you’re bringing over. Some advisors can’t legally hold certain types of assets. Be very clear on the new advisor’s capabilities.
While you definitely want your new advisor to be all caught up on your financial history, you should be as well. Keeping accurate financial records is a key part of financial health. It’s also up to you to track and mediate the transfer of files between your advisors. No one will care about your money the way you do, and should the IRS ever come knocking, having these files will make everything easier.
You’re not alone in wanting to switch financial advisors. A 2015 poll showed that 60% of super-high-income earners and 51% of mid-range-income earners switch financial advisors at least once, so mixing it up can be a good thing. Here are a few warning signs to pay attention to:
Bad communication from your investment advisor is a big red flag. It’s one thing to have a question or issue that needs to be taken care of, but it’s a whole other thing to not have consistent contact with them.
You shouldn’t have to constantly wonder if your investments are being taken care of. You’re a paying client, so it’s their responsibility to reach out to you, to see if you have questions, issues, or just want to chat.
Handing over your money and financial life to someone else is scary! Make sure the person on the other end understands the importance of keeping the lines of communication open.
In order for your financial professional to accurately help you reach your financial goals, you’ve got to be open and transparent with your money. Likewise, they need to be just as transparent with how they run their business and their investment strategies.
How do they earn money off your investments? Are they partners with any of the funds? Do they participate in revenue-sharing?
These are the types of questions you should ask, and your financial advisor should be more than happy to answer.
Sometimes it comes down to a gut feeling, so if you don’t feel comfortable with them, or you don’t think they are being honest and transparent about how they handle your money, it’s probably time to find a new financial advisor.
We all have our own financial goals and aspirations for building wealth. This is something you and your investment professional need to be on the same page about. If there are too many philosophical differences between both of you, that’s a recipe for disaster.
Does your advisor believe in taking more risks? What’s their personal investment strategy? Do they invest emotionally or have a level-head?
If both of your beliefs don’t match up, and your investment advisor doesn’t understand your goals about saving for the future, it will be difficult — maybe even impossible — for them to properly manage your portfolio.
If there are too many differences in philosophies and strategies, it’s time to seek out a new advisor.
The time has come to say goodbye. Even though you’ve been together for years, you no longer feel comfortable even talking. They don’t understand your situation and aren’t meeting your needs. You’ve been in this relationship for a while, but it needs to come to an end.
Breakups aren’t just for romantic partners. Believe it or not, switching financial advisors can be an ordeal as well. It’s more complicated than saying, “Adios,” and walking out the door. There can be service fees, potential tax liabilities and a bunch of new paperwork.
There’s also the mental barrier to break through — you may have been with your first financial advisor for what feels like forever. They probably got you started with your personal finances — helping you set up your retirement accounts, getting you signed up for life insurance and answering questions you had about the whole process.
But as with any bad relationship, you may have decided it’s time for a change.
We’re here to walk you through the process of leaving your financial advisor once you decide they’re no longer meeting your needs.
