Transitioning to a new financial advisor is a significant decision that can impact your financial future. Whether you're moving to a new advisor for better service, different expertise, or simply a change, having a comprehensive checklist can ensure a smooth transition. This guide provides you with the essential steps to consider when switching financial advisors.
This guide will walk you through the steps of transitioning to working with a new financial advisor.
Welcome! If it's your first time on AdvisorFinder, you might want to have a look at the AdvisorFinder blog and the post titled, "How to Choose a Financial Advisor".
We included a downloadable .pdf version of this checklist. However, we recommend reading through this entire guide to get the most out of this downloadable checklist.
Before transitioning to a new financial advisor, it's important to assess your current financial situation. Take a close look at your assets, liabilities, income, and expenses. Evaluate your short-term and long-term financial goals. Understanding your current financial standing will help you communicate your needs and expectations to your new advisor.
Consider gathering relevant documents such as bank statements, investment account statements, tax returns, and insurance policies. This will provide a comprehensive view of your financial situation and assist your new advisor in creating a tailored plan for your needs.
Assess how your current advisor has met your financial goals. Are you satisfied with the investment performance, communication, and overall service?
Clarify why you want to switch advisors. Common reasons include:
- poor performance
- lack of communication
- high fees
- a change in financial goals
Before transitioning to a new financial advisor, it's crucial to gather all relevant documents to ensure a smooth and efficient process. This step will provide a comprehensive view of your financial situation and help your new advisor create a tailored plan that best suits your needs.
Take the time to collect the following documents and information:
To ensure a smooth transition, gather the following information about your current financial advisor:
Having this information readily available will make it easier for your new advisor to contact your previous advisor if necessary and to ensure that all relevant information is transferred.
Compile a list of all your account details, including:
This information will be essential for your new advisor to access and manage your accounts effectively.
Gather all relevant information about your agreement with your current financial advisor, including:
This information will help your new advisor understand the terms of your previous agreement and ensure that all necessary steps are taken to terminate the relationship properly.
Collect any relevant communication you have had with your current advisor, especially if it pertains to issues that prompted the termination. This may include emails, letters, or notes from meetings. This documentation can provide valuable context for your new advisor and may be helpful if any disputes arise during the transition process.
Ensure you have copies of all financial records, reports, and statements provided by your advisor during the engagement. These documents may include:
Having a complete set of financial records will help your new advisor get up to speed quickly and provide a historical context for your financial situation.
If you have already selected a new financial advisor, gather their contact information:
By providing this information to your current advisor, you can facilitate a smooth transfer of your accounts and documents.
Lastly, while we don't want to 'jump the gun', it could be helpful to start pulling together important financial info and docs for your new advisor. See below for a list of examples that could give them a head start in getting familiar with your financial picture:
If you come to the conclusion that you are ready to terminate your existing advisor, then we recommend writing a letter or an email. It's the most professional way to initiate this conversation and, of course, you need an official record of termination.
By taking the time to write a letter or email, you will be able to carefully formulate your reasons as to why you've decided to fire your advisor. This is important not only for your own clarity, but also to provide a clear explanation to your advisor. In your letter, be sure to outline the specific reasons that led you to this decision. Perhaps you feel your advisor hasn't been attentive enough to your needs, or maybe you disagree with their investment strategy. Whatever the reasons, articulating them in writing will help ensure your message is conveyed clearly.
👉 Download our sample termination letter to fire your financial advisor
In addition to explaining your reasons for terminating the relationship, your letter should also explain what you expect from your advisor in terms of account transition and timelines. Be specific about when you expect the relationship to officially end, and what steps need to be taken to smoothly transfer your assets to a new advisor or firm. Providing these details upfront will help avoid confusion and ensure a more seamless transition.
Remember, while it may be a difficult conversation, terminating your advisor is a business decision. By approaching it in a professional manner and putting your thoughts in writing, you'll be better positioned to move forward with confidence and find an advisor who better meets your needs.
Take the time to research and explore potential advisors before making a decision. Look for advisors who specialize in your specific financial needs, such as investment management, or family financial planning, for example. Consider their experience, credentials, and track record.
When you're ready, a crucial next step is to find a better-suited financial advisor to ensure you remain on track toward your goals. This is where AdvisorFinder comes in. Here's your step-by-step guide to finding a financial advisor on AdvisorFinder.
Additionally, check if the advisors are registered with regulatory bodies such as the Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA). These registrations ensure that the advisors adhere to certain standards and regulations.
Not all financial advisors are created equally; this is part of why we built AdvisorFinder. On each advisor's profile, you can quickly navigate to their Investment Adviser Public Disclosure, which displays detailed information about the advisor's current qualification status, professional background, any misconduct involving the individual, etc.
It's important to ensure potential new advisors have the necessary qualifications to provide the services you are looking for. You can verify this by checking the advisor’s registration with regulatory bodies such as the SEC or FINRA to ensure they have a clean record.
Before choosing another advisor, or even starting to research potential new advisors, it might be worthwhile to ask yourself these questions:
Obviously, there aren't really any right answers to these questions. Choosing a financial advisor is mostly about your personal preference and finding someone you feel comfortable working with. Of course, many people want consistent investment returns, but more importantly, people choose people. It's a relationship built on trust and mutual understanding.
Choosing a financial advisor is a big decision that requires a lot of trust. You're essentially putting part of your financial future in their hands, so it's crucial to find someone you can rely on and feel confident in. Take your time in making this decision. It's ok to meet with several potential advisors, ask them questions about their experience, investment philosophy, and how they work with clients. Even taking a few meetings to really get to know your potential new advisor is completely acceptable and reasonable.
Consider their communication style and whether you feel heard and understood. A good financial advisor will take the time to learn about your unique financial situation, goals, and risk tolerance. They should be able to explain complex financial concepts in a way that makes sense to you and be transparent about their fees and how they get paid.
Ultimately, trust your instincts. If something doesn't feel right or you don't feel comfortable with an advisor, keep looking. With a little research and due diligence, you can find a financial advisor who is a good fit for you and your financial needs. Remember, this is a long-term relationship, so choose wisely and don't rush into any decisions.
Once you have identified potential advisors, it's crucial to understand the services they offer and their fee structure. Different advisors may provide various services such as financial planning, investment management, tax planning, or insurance advice. Determine which services align with your needs and goals.
Ask about their fee structure, including any upfront fees, ongoing management fees, or commissions. Make sure you fully understand the costs associated with their services, as this will impact your overall financial plan and investment returns.
Determine if the advisor offers the services you need, such as retirement planning, tax planning, estate planning, or investment management.
Understand how the advisor charges for their services. Common structures include flat fees, hourly rates, or a percentage of assets under management (AUM).
After narrowing down your options, schedule initial consultations with the advisor(s) you are considering. These consultations provide an opportunity to discuss your financial goals, ask questions, and assess their communication style and approach.
Remember, there's nothing wrong with interviewing multiple financial advisors before deciding to work with one. By meeting with 2-3 different advisors, you can more easily gauge what you like and what you don't like.
It could also be useful to prepare a list of questions beforehand to ensure you gather all the necessary information. Some questions to consider asking include:
- How do you customize your financial plans for clients?
- How often will we meet to review my financial situation?
- How do you handle market volatility and adjust investment strategies?
- How do you stay up-to-date with industry trends and regulations?
👉 Read our guide on questions to ask a financial advisor when getting to know them
Create a comprehensive comparison chart of the advisors you've interviewed, focusing on the services they provide, their fee structures, and your overall impressions of each advisor. Take note of any unique offerings or specialties that stand out. Consider the advisor's experience, qualifications, and communication style. Evaluate how transparent they are about their fees and whether they offer value for the cost.
After carefully reviewing your comparison chart and weighing the pros and cons of each advisor, it's time to make a decision. Choose the advisor who best meets your needs, aligns with your financial goals, and makes you feel comfortable and confident. Trust your instincts and select the advisor you believe will be the best partner in your financial journey.
Transitioning your accounts can sometimes be challenging. But if you've been following this guide, your financial advisor transition has probably been a breeze. Now that you're almost at the finish line, we want to make you aware of an important aspect of the transition: account transfer.
As a client with a managed investment account, you may have access to something called the Automated Customer Account Transfer Service (ACATS). Not all U.S. clients of investment managers have access to the Automated Customer Account Transfer Service (ACATS). The eligibility for using ACATS depends on several factors, including the type of account, the assets held within the account, and whether the financial institutions involved support ACATS transfers.
ACATS can transfer a wide range of assets, including publicly traded stocks, exchange-traded funds (ETFs), cash, bonds, and most mutual funds.
Certain types of accounts and assets are not eligible for ACATS transfers. For example, legacy mutual fund accounts, annuities, and employer-sponsored plans like 401(k) or pension plans generally cannot be transferred via ACATS.
Both the delivering and receiving institutions must support ACATS transfers. If either institution does not participate in ACATS, the transfer must be handled manually, which can be more time-consuming and prone to errors.
Individual taxable accounts, IRAs, and some joint accounts, trust accounts, and inherited IRAs can be transferred via ACATS, although the process may vary depending on the specific account type and the institutions involved.
Some brokers have minimum requirements for ACATS transfers. For example, Betterment requires a minimum transfer amount of $5,000 for connected accounts and $10,000 for non-connected accounts.
Certain securities, such as annuities and some proprietary investments, cannot be transferred through ACATS. These may need to be liquidated and transferred as cash instead.
The ACATS process is initiated by the receiving firm and typically takes 3-6 business days to complete, compared to up to a month for manual transfers.
While ACATS provides a streamlined and efficient way to transfer assets between financial institutions, not all clients or account types are eligible. The eligibility depends on the type of account, the assets held, and whether the institutions involved support ACATS transfers. Clients should check with their financial institutions to confirm eligibility and understand any specific requirements or limitations.
In case your accounts are not eligible for ACATS, below are some general guidelines for account transition when switching financial advisors.
Notify Your Current Advisor: Once you've made your decision on a new financial advisor, inform your current/previous advisor of your intention to begin transitioning your account(s). Schedule a meeting or call to discuss the process of transferring your accounts.
Be professional and courteous, expressing gratitude for their services while clearly explaining your reasons for making the change.
Paperwork and Documentation: To facilitate the transfer of your accounts, you'll need to complete all necessary paperwork and provide required documentation. This may include signing transfer forms, providing identification documents, and authorizing the release of your account information. Your new advisor should guide you through this process and help you gather the needed materials.
Transfer Assets: Coordinate with both your current and new advisor to ensure a smooth and efficient transfer of your assets. Your new advisor will likely take the lead in this process, working with your current advisor to initiate the transfer. Keep in mind that transferring assets can take several weeks, depending on the complexity of your accounts and the cooperation of your current advisor. Be patient and plan accordingly.
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