Can You Change Financial Advisors? And How to Do It

Changing financial advisors is a normal part of financial management as financial lives evolve. This decision often arises from shifting personal circumstances, changing financial goals, or a desire for different service levels. Aligning your advisory relationship with current and future needs is key.

Reasons for Considering a Change

Clients often seek a new advisor due to dissatisfaction.

Investment Performance

Unhappiness with investment performance or strategy is a frequent cause. Consistent underperformance compared to benchmarks, or a strategy misaligned with risk tolerance, can prompt a search for new guidance.

Fee Structures

Fee structures, if perceived as high or lacking transparency, are a common concern. Advisors typically charge 0.5% to 1.5% of assets under management, with rates decreasing for larger portfolios. Clients may also pay hourly fees ($150-$400 per hour) or fixed fees. Unclear fee arrangements or insufficient value can lead clients to explore alternatives.

Poor Communication

Poor communication or lack of responsiveness is a significant driver for change. Some reports indicate up to 72% of clients cite it as a primary reason for leaving. This includes infrequent updates, unreturned calls, or failure to proactively discuss market changes. Clients expect clear, timely, and proactive communication.

Life Changes

Significant changes in personal financial goals or life circumstances necessitate reevaluation. Major life events like marriage, divorce, career transitions, or approaching retirement dramatically alter financial needs. An advisor who does not adapt strategies may no longer be a suitable fit.

Desire for Different Services or Specialization

A desire for different services or a specialized advisor can prompt a change. Clients may seek comprehensive financial planning beyond investment management, including tax, estate, debt management, or charitable giving. If a current advisor’s expertise is limited, clients may look for a specialist.

Lack of Trust

Outgrowing the current advisor or a lack of trust can lead to a switch. Trust is foundational; if it erodes due to perceived conflicts of interest, lack of transparency, or a feeling the advisor is not acting in your best interest, a change becomes necessary.

Key Considerations Before Making a Move

Assess the current advisor relationship before initiating a change.

Review Current Relationship

Review your existing advisory agreement to understand the fee structure, including ongoing advisory fees, commissions, or transaction charges. Understand the scope of services received, such as investment management or financial planning. Evaluate investment performance relative to your goals and risk tolerance. This assessment clarifies what worked well and what needs improvement.

Define New Needs and Goals

Defining new needs and goals provides clear direction for selecting a new advisor. Identify preferences for fee structure (e.g., fee-only, fee-based) and desired services (e.g., investment management, comprehensive financial planning). Consider communication style, meeting frequency, and the advisor’s investment philosophy to narrow down candidates.

Research New Advisors

Researching potential new advisors is a key preparatory step. Explore different types of advisors, such as Registered Investment Advisers (RIAs) with a fiduciary duty, or broker-dealers. Check professional certifications like Certified Financial Planner (CFP®). Vet candidates by reviewing regulatory records through FINRA BrokerCheck or the SEC’s Investment Adviser Public Disclosure (IAPD) database for disciplinary actions or complaints.

Gather Documentation

Gather necessary documentation for a smooth transition. This includes recent financial statements for investment and bank accounts, tax returns, estate planning documents, and other personal identification. Having these records ready streamlines onboarding with a new advisor.

Consider Potential Costs

Consider potential costs like transfer fees ($50-$100 per account) or new account setup fees. Understanding these financial implications helps in planning the transition.

The Process of Transitioning to a New Advisor

Once a new advisor is selected, the transition of accounts and assets can begin.

Initiating the Transfer

The new advisor typically facilitates the transfer, often using standardized systems like the Automated Customer Account Transfer Service (ACATS). ACATS is an electronic system used by brokerage firms and banks to transfer accounts efficiently. Transfers usually complete within a few business days to weeks, though complex accounts may take longer.

Notifying Your Current Advisor

Notifying the current advisor is important, though the new advisor’s firm often initiates the formal transfer. Clients authorize the new firm to request asset transfer from the existing firm. A brief, professional notification to the previous advisor can be a courtesy. The new advisor guides clients through necessary paperwork, including new account applications and transfer initiation forms.

Transfer Options

Clients generally have two primary transfer options: in-kind or liquidation and cash.
In-kind transfer: Moves existing securities (stocks, bonds, mutual funds) directly to the new account without selling them. This helps avoid potential capital gains taxes on appreciated assets.
Liquidation and cash transfer: Sells assets in the old account and transfers cash proceeds to the new account for reinvestment.
The choice depends on your tax situation, investment objectives, and compatibility of existing holdings with the new advisor’s philosophy.

Monitoring Progress

Throughout the transition, monitor asset transfer progress. Regularly check old and new accounts to ensure all assets move correctly. Maintain open communication with the new advisory firm about transfer status to address issues promptly. Confirming transfer completion and accurate reconciliation marks the end of this phase.

What to Expect After the Transition

After assets transfer, confirm and review the transition.

Confirm Transfer and Reconciliation

Verify all accounts and holdings have been correctly moved and reconciled within the new firm’s system. Check account balances, confirm transfer of all securities or funds, and ensure cost basis information is accurately reflected for tax reporting. Promptly bring any discrepancies to the new advisor’s attention.

Financial Plan Implementation

Following reconciliation, new financial plan implementation begins. The new advisor will finalize the financial plan based on discussed goals, risk tolerance, and desired services. This may involve adjusting investment allocations, establishing new savings strategies, or setting up specific accounts for objectives like retirement or education. The plan should clearly outline steps and expected outcomes.

Establish Communication Protocols

Establishing clear communication protocols is key to building the ongoing relationship. Agree on how and when communications will occur, such as scheduled quarterly meetings, periodic phone calls, or secure online messages. Discuss the frequency of performance reports and how complex financial concepts will be explained. This agreement sets expectations for the ongoing relationship.

Familiarize with New Systems

Familiarize yourself with the new firm’s reporting systems, statements, and online portals. Understanding how to access account information, view performance reports, and utilize digital tools is important for oversight. The new advisor and their team should provide guidance on navigating these resources.

Ongoing Relationship Management

Ongoing relationship management involves continued engagement and periodic reviews. Financial plans are not static; they require regular adjustments for life changes, market shifts, and evolving goals. Actively participate in reviews, providing updates on your circumstances and asking questions to ensure the plan remains aligned. This proactive engagement contributes to a strong, productive long-term relationship.