Why Should You Change Your Financial Advisor?

If you're considering changing your financial advisor, you're certainly not alone. People often decide this relationship needs to change, frequently citing a lack of communication, dissatisfaction with the investment advice and ideas being provided, or concerns about their portfolio's performance.

"Clients shouldn’t feel anxiety or guilt about moving on from an advisor that isn’t helping them achieve their goals," David Flores Wilson, a certified financial planner at Sincerus Advisory in New York City, told us. "A straightforward conversation outlining their decision to move on and clarifying if there are any open items should be enough."

Still, making the switch to a new financial advisor requires careful planning and attention to detail. Below, we'll walk you through the essential steps to ensure a smooth transition while protecting your investments and avoiding unnecessary fees.

How To Make the Switch

Before starting the move, get up to date on your current firm's transfer process and timing considerations. If you plan to switch mid-year, ask about handling any prepaid annual fees and whether they can be prorated. This initial research will help you avoid uꦕnexpected costs and delays.

1. Read Your Contract's Fine Print

Start by examining your current m🍌anagement contract. Look specifically for the termination clause, which outlines the formal process for ending the relationship. Manꦡy firms require a signed letter, and some may charge a termination fee.

Undeꦗrstanding these requirements up front helps you plan your transitiꦐon more easily.

2. Secure Your Records

If you leave your doctor, they are required by law to give you copies of your medical records. But what about your investment broker or financial advisor? Good news: A federal regulation requires that your current advisor or broker transfer the historical records of all of your assets to your new advisor.

Before initiating any transfer, download your complete transaction history from your current advisor's online portal. While you're copying your investment accounts, don't overlook the records of the 澳洲幸运5官方开奖结果体彩网:cost basis of taxable securities. The cost basis is the price of the asset adjusted for 澳洲幸运5官方开奖结果体彩网:stock splits, dividends, and return-of-capital distributions. It's required information for the IRS Schedule D that you prepare to report taxable gains.

3. Leave Much of the Work to Your New Advisor

Your new advisory firm can handle most of the transition logistics through the automated customer account transfer service (ACATS). This electronic system typically completes transfers within one to three wee𝐆ks, though some specialized investments lik♌e hedge funds may take longer.

4. Evaluate Transfer Costs

Some investments carry contracts that𝓰 lock down your m💃oney for a specified period of time. Before you make the switch, find out what it will cost you in fees.

In addition, some of your investment accounts may be exclusive to your former advisor's firm. In that case, you can't automatically transfer those assets. You may be forced to sell those assets and pay related fees and penalties.

For instance, if you have an 澳洲幸运5官方开奖结果体彩网:annuity contract that is proprietary to your old💙 firm, you may have to cash it out and then transfer the proceeds to your new advisor for investment. You might have to cough up as much as 10% of the contract value, known as deferred sales charges.

5. Consider Fund-Specific Details

Some 澳洲幸运5官方开奖结果体彩网:mutual funds have five- to 10-year holding periods. If you have one of these funds with your old firm, you may have to pay a 澳洲幸运5官方开奖结果体彩网:contingent deferred sales charge should you choose to make the switch before the end of the period. This▨ fee could be 5% or more. The percentage typically decreases each year.

Figure out whether it makes more sense to keep the annuity contract or the mutual fund wit🍌h your former advisor or take the hit for switching—your neꦛw advisor can certainly help with this. If you expect to make much more money in the new situation, a one-time fee might be worth it.

Some investment firms or advisors will reimburse you for all or some of these fees in exchange for moving your business to them. It's worth asking before you make the change.

Minimizing the Impact of a Transfer

When swꦬitching advisors, timing and preparation are crucial. Calculate the total cost of transferring, including any termination fees, transfer charges, and potential tax implications. Consider keeping certain investments with your current firm if transfer costs outweigh immediate benefits.

Your new adviso🐠r can help evaluate these trade-offs and develop a transfer strategy that protects your financial interests.

The Bottom Line

Breಞakups are never easy, particularly when it comes to calling it quits with your financial advisor. Before you send your cౠurrent advisor packing, do your research and read all the fine print in your contract. Ask your new advisor what fees you should expect if you switch.

Lastly, don’t forget to 澳洲幸运5官方开奖结果体彩网:study up on your new advisor. Beware of overly optimistic promises. If the promised returns sound too good to be true, they probably are💦.