Changing Financial Advisors? What to Know Before You Move Your Investments

Changing financial advisors involves more than choosing a new firm. You are deciding who will manage your investments, how the relationship will work and what happens to the portfolio you already own.

You do not need to commit to a move before asking those questions. Start by understanding what you want to improve, then compare the proposed relationship and transition plan with what you have today.

Identify what needs to change

Perhaps your questions go unanswered, your costs are difficult to understand or retirement is approaching without a clear withdrawal plan. You may want more direct contact with the person making investment decisions. Write down the concerns that prompted your search and what a satisfactory answer would look like.

A period of disappointing performance deserves discussion, but it does not by itself establish that an advisor is a poor fit. Ask whether the results reflect the agreed investment approach, the risks you accepted and an appropriate comparison. Moving to whichever strategy performed best recently can create a new problem without resolving the original one.

Ask who will make the decisions

Before focusing on a firm’s presentation, understand the working relationship. Who selects investments? Who monitors the portfolio? Who will speak with you when your circumstances change? If different people fill those roles, how do they coordinate?

Ask how the advisor learns about your spending needs, other accounts and financial commitments. Find out how you can raise a question and how changes to your goals affect investment decisions. The answers should be specific enough that you can picture being a client.

Understand the full cost and the firm’s background

Request the advisory agreement, fee schedule and Form ADV brochure. The brochure describes the firm’s business, fees, conflicts and other important information. You can review registration and disclosures through the investment Adviser Public Disclosure database. Registration does not establish investment skill or guarantee a good outcome.

Ask for the estimated annual advisory fee in dollars at your current portfolio value, plus underlying fund expenses and applicable additional charges. Then ask what work the fee covers. A comparison is more useful when both the costs and responsibilities are clear.

Review your holdings before deciding what to move

Changing advisors does not automatically require selling every investment. Many eligible holdings can transfer in kind, meaning the investments move without being sold. Availability depends on the assets and receiving institution. Proprietary products, certain alternative investments and other holdings may need different arrangements.

Separate two questions: Can an investment transfer, and should it remain in your strategy? Those are not the same decision. Request an explanation of any proposed sale, including the investment reason, potential tax consequences and alternatives.

For example, suppose a taxable account contains a broadly diversified fund with a substantial unrealized gain. A new advisor should evaluate its cost, risk and role alongside the tax cost of replacing it. A preference for a different fund is only part of that assessment. This hypothetical situation does not imply that keeping or selling is always preferable.

Plan the transition around your cash needs

Start by reviewing the portfolio with the prospective advisor. Identify which holdings can transfer, any restrictions and the money you will need during the move. Discuss proposed investment changes separately, including their timing and potential tax costs. Agree on who handles the paperwork and follows up on outstanding items before authorizing the transition.

Review your current advisory agreement for any notice requirements, and ask the new advisor who will coordinate the paperwork and communication.

A properly structured transfer is different from taking a retirement-account distribution. Confirm account registration and transfer instructions before acting. If your assets are already at the new advisor’s custodian, ask whether a change in advisory authorization is sufficient instead of a custodian transfer.