How do I terminate a relationship with my financial advisor?

On this episode of A Wiser Retirement™, Casey Smith is joined by Missie Beach, CFP®, CDFA®, to talk about how to terminate a relationship with your financial advisor. We discuss common reasons people part ways with financial advisors, understanding any terms related to termination, tips for communicating the decision to your advisor, and how to monitor the transition.

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Summary

Reasons People Leave Their Financial Advisor

Casey and Missie begin the episode by talking about the various reasons for terminating a relationship with a financial advisor. They note that misaligned investment philosophies is one of the most common reasons. Older advisors may not have kept up with industry trends, favoring mutual funds over more tax-efficient exchange-traded funds (ETFs). Mutual funds are expensive and often underperform the market, leading to capital gains taxes and hidden costs. Here’s a list of common reasons people leave their financial advisor:

• Misaligned Investment Philosophies
• Underperformance
• Communication Issues
• High or Unexpected Fees
• Life Changes (Marriage, Divorce, Birth of a Child, Retirement)
• Desire for a Different Service Model
• Desire to Self Manage

Review Your Agreement and Notify Your Advisor

It’s important to review your agreement with your current advisor so that you can understand any terms related to termination. This could include a notice period, as well as fees or penalties for early termination. This is crucial to ensure you’re prepared for any financial implications or obligations.

Some people may choose to write a letter to their advisor, expressing gratitude for their past services and announcing the decision to switch to a different financial adviser. Be clear, concise, and firm in your explanation, focusing on your needs and how they’re not being met, rather than personal criticisms.

Transferring Assets to a New Firm

After notifying your advisor of your decision, there will likely be paperwork to complete in order to officially terminate the relationship and transfer your assets. Once paperwork is signed and delivered to the new brokerage company, they will then communicate with the old company to initiate the transfer. When moving to a firm like Wiser Wealth Management, which uses Charles Schwab as a custodian, you can hold onto existing securities and avoid liquidating your portfolio. We can use tax-efficient strategies such as direct indexing and tax-loss harvesting to make the transition more beneficial for the client. Keep in mind that at larger firms, clients may be just a number and don’t always receive the level of customization and attention that a boutique firm like Wiser can offer.

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