Personal Finance

I'm thinking about breaking up with my longtime financial advisor - what should I consider?

Kristin Hitchcock

Published: December 16, 2024 11:05 am

Financial advisors are a huge part of managing your wealth, but that doesn’t mean you have to stick with the same financial advisor forever. Deciding to part ways with a financial advisor is a big deal, especially if they’ve been managing a portion of your finances for years. Recently, I came across a Reddit post that was struggling with this exact problem: how do you make the transition smooth and successful?

24/7 Wall St. Key Points

• If you’re feeling dissatisfied with your financial advisor, taking your portfolio elsewhere may be a solid option. 
• However, it’s important to have a plan set up to ensure the transition is as smooth as possible. 
• Also: Take this quiz to see if you’re on track to retire ^(Sponsored)

Before you decide to make the leap, here’s what you should consider to make the transition smoother:

1. Evaluate Your Reasons for Leaving

Before making any moves, consider why you’re leaving in the first place:

• Are they unresponsive or unhelpful?
• Are the fees outweighing the value they provide?
• Have you gained the confidence and time to manage your investments independently?

If the issues are fixable (like requesting more personalized advice), it might be worth discussing before severing ties. Transitioning to a new advisor can be a lot of work, so it’s recommended to exhaust your options with your current advisor first. 

2. Understand the Transition Process

Transferring accounts from an advisor to a self-managed platform like Vanguard or Fidelity is straightforward, but there are steps to follow:

1. Check for transfer fees: Many advisors and firms charge fees to transfer accounts.
2. Assess account types: The types of accounts you’re transferring matter. Tax-advantaged accounts like IRAs often transfer easily. However, general investments may require extra attention due to their potential tax implications.
3. Select a custodian: You’ll need to pick a new brokerage firm, too, of course. Do this before you start the transfer process. 

3. Simplify Your Investment Strategy

For those wanting to self-manage their funds, it may be best to simplify your investment strategy. 

For instance, you could consider target date funds, which you can “set and forget,” especially for IRAs and 529 accounts. Consider taking advantage of low-cost index funds or ETFs, too, as these can provide instant diversification without you needing to watch your accounts constantly. 

4. Avoid Common Pitfalls

Transitioning your portfolio can be anxiety-inducing. However, there are many ways to manage the risks. Don’t make these mistakes:

• Rushing the process: Take your time to ensure everything is done correctly. 
• Ignoring tax consequences: Transfering or selling assets can trigger taxes in non-retirement accounts. Keep this in mind!
• Overcomplicating your investments: If you’re taking independent control of your investments, you’ll probably need to simplify your investment options. 

5. Consider a New Advisor

Just because you aren’t unhappy with your current advisor doesn’t mean you’ll be unhappy with any advisor. There are several alternative options that don’t involve going completely solo, like:

• Fee-only advisors: These advisors charge a flat fee or hourly rate to provide advice.
• Hybrid platforms: You could consider robo-advisors, too, which offer automated investing with some human support (often at a lower price).