Some relationships weren’t meant to be. Investors should prioritize their financial well-being, and if they feel uncomfortable with their advisor’s communication, service level, or strategy, they should move on. In a long-established relationship, an advisor would have intimate knowledge of a client’s financial and personal information. They would know about developments in their client’s lives. They might have even formed a friendship. By being upfront and saying goodbye with consideration, professionalism, and mutual respect, investors can achieve a clean break that is both guilt and hassle-free.
These are the steps to initiating a healthy break-up with a financial advisor:
Consider the decision
Investors should include their partner or spouse in the decision to switch advisors and inform all parties the change will directly impact. They should review their contract with their current advisor for any clauses and obligations surrounding the termination of the agreement. Additionally, investors should evaluate the terms of their various holdings and accounts and weigh the pros and cons of keeping some assets with their current advisor.
Gauge the prospects
Before the split is official, investors should have a plan. They should identify what is lacking in their current advisor relationship and what they want from the next. They should interview a few new advisors to learn about their wealth planning services, fee structure, and products. A face-to-face meeting also allows investors to assess their fit regarding personalities, ideals, and values. The winning advisor has the knowledge, products, and services to execute the desired plan. Once in place, they can also help to transition assets from the previous institution.
Deliver the news
For the most part, a signed letter or email is sufficient to end the investor-advisor relationship. Ideally, the client approaches their advisor to try and work through concerns before abandoning the ship. If that discussion does not bring resolution the termination notice shouldn’t come as a shock. While it’s not mandatory, a follow-up conversation with the current advisor to discuss the particulars of the transfer to the new advisor could go a long way toward easing the process. It’s also best practice and builds good karma.
Assess the limitations, fees, and penalties associated with the transfer
Investors can have their new advisor handle all of the details of the switch or initiate the process with their acting financial institution. Chances are some costs will result from settling up existing accounts and transferring assets. Advisor contracts may contain termination fees. Commissions associated with liquidating stocks and mutual funds may also apply. Investment accounts exclusive to the current financial institution may require investors to sell the assets and pay charges or penalties. Some mutual funds assign a contingent deferred sales charge against the premature sale of the fund shares.[1]
Transfer the securities
The easiest way to conduct a transfer between two firms is through a system known as the Automated Customer Account Transfer Service (ACATS). As long as they are eligible to use the system, the new financial advisor can initiate the electronic transfer which moves securities from one trading account to another at a different bank or brokerage. The system centralizes, standardizes, and expedites transaction settlements. The transfer itself is free and it maintains the investor’s original purchase details and avoids market risk by keeping investments intact.[2]
Secure the records
Investors should obtain a copy of all records and transactions from their acting institution for tax purposes and in case there’s an issue with the transfer. Clients can usually download their transaction history and documents from their account page on their acting institution’s website. Timing is important, as they can lose access once the account is closed. Acting financial advisors must transfer their client’s records to the new institution by law, but the process can take some time. Investors should ask their current advisor how long they retain personal data after a completed transfer.
Breaking up is hard to do. But a big change can inspire reflection and reevaluation leading to fresh perspectives, new gains, and positive outcomes. That deserves to be celebrated. If you are ready to find your wealth-planning match don’t look back. Sign up for a complimentary review of your finances at SHP Financial here.
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