A financial advisor can provide valuable support to help you manage your investments. Like any relationship, trustTrust An account set up to hold assets for a beneficiary. A trustee manages the assets until the beneficiary reaches legal age.+ read full definition and mutual respect are important. Your confidence in your advisor can change over time. Sometimes your life changes and you may want a fresh perspective on your portfolioPortfolio All the different investments that an individual or organization holds. May include stocks, bonds and mutual funds.+ read full definition or a new person to interact with.
5 considerations for changing your financial advisor
You can change your financial advisor if you’re unhappy. Every year there are many Canadians who change their financial advisor. There are a few things you’ll want to consider before making a switch.
1. Have a clear reason why you’d like to change advisors
It can take time to make a change, so it’s good to have a clear sense of why your current advisor relationship isn’t working out. Consider if this is something that you’ve been thinking about for a while, or due to something more sudden.
For example, you may be concerned about:
- Your questions and needs not being addressed
- Your advisor’s expertise isn’t the best match to your investing goals
- Your portfolio is underperforming your goals
- Being able to meet with your advisor when it’s convenient to you
- Being able to get in touch with your advisor in a timely manner
- The fees you’re paying compared to the service you’re getting
These are just some of the reasons worth paying attention to. If changing advisors is on your mind, then it may be worth switching. However, if your concern is the performance of the portfolio, it is important to first review your investments in context of the current market as well as your time horizonTime horizon The length of time that you plan to hold an investment before you sell it. This may be a brief period of time or span as long as decades, depending on your financial goals.+ read full definition. As transfers can be costly, it is usually prudent not to overreact to temporary market fluctuations.
Don’t feel guilty if you want to make a change. Ultimately, your investments are yours to manage, and the advisor relationship is part of that.
2. Review your current contractContract A binding written or verbal agreement that can be enforced by law.+ read full definition and transfer forms
Before initiating a switch, review your contract with your current advisor. There may be language that specifies how to end the relationship, for example whether a formal letter is required. Your current advisor and their firm must be diligent and prompt in processing your transfer request.
Be sure you understand what information your current advisor requires from you to facilitate the transfer to your new advisor in a timely manner. The time required to complete the transfer could depend on the type of accountAccount An agreement you make with a financial institution to handle your money. You can set up an account for depositing and withdrawing, earning interest, borrowing, investing, etc.+ read full definition you are transferring and the type of investments you hold.
Typically, transfers are completed between 10-20 business days after receiving the client’s request in good order. However, the process can take longer due to a number of factors. If you have not, for example, completed required forms appropriately or if you have insufficient funds in your account to cover transfer fees, there could be a lengthy delay in transferring your account.
3. Check the fees that may be required to transfer
Check any fees that could be involved in transferring to another firm, or if you have pre-paid any annual feeAnnual fee A fee that is charged on an annual basis. One common occurrence of an annual fee is the fee charged by credit cards.+ read full definition to work with your current advisor. If you’re unable to recoup that fee when leaving part way through the year, decide whether you want to leave when the year is up, or absorb the expense.
It’s also a good idea to confirm whether your investments can all be switched somewhere new. Some may be specific to your current advisor’s firm, or they may carry heavy fees to be switched. If you are required to sell off investments in order to switch advisors, there could also be taxTax A fee the government charges on income, property, and sales. The money goes to finance government programs and other costs.+ read full definition consequences.
4. Finding a new financial advisor
Once you’re sure you want to change advisors, there are a few ways to approach finding a new one. You can try searching online, asking for referrals from friends or co-workers who are happy with their advisor, or finding out what optionsOptions An investment that gives you the right to buy or sell it at a set price by a set date. The buy right is termed a “call” option, and the sell right is termed a “put” option. You buy options on a stock exchange.+ read full definition are available at your current financial institution.
Then, set up meetings with potential candidates. When you meet with them, come prepared with a list of questions for them. Know what your “must haves” are in the relationship. And also, let them know you’re looking for a new advisor and are keeping options open until you make a final decision.
As always, check before you invest. Make sure your new advisor is registered before you commit to working with them.
There are at least 4 different ways to find an advisor through referrals.
5. Tell your current advisor why you’ve chosen to switch
If you’ve decided to change the management of your investments, you’ll need to tell your current advisor. This likely needs to be done in writing, but it’s also possible your new advisor could handle this process for you.
It’s possible your current advisor will ask you why you’re making the change. They may encourage you to stay with them. Be prepared with an answer and be clear about the reason you’ve decided to switch.
Switching advisors may involve some costs. For example, there may be transfer fees for changing to new accounts. Find out what costs may be involved before making the shift, so you’re not surprised later on.
6. Start your new advisor relationship on the right foot
Your first meeting with your new advisor is a great chance to be clear about what you want. Prepare for the meeting by confirming your goals and expectations, for example:
- Your long-termTerm The period of time that a contract covers. Also, the period of time that an investment pays a set rate of interest.+ read full definition and short-term investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition goals
- Your preferred level of risk tolerance
- How often you expect to meet
- The performance you would like on your investments
Knowing the answers to these types of questions will help the meeting proceed smoothly.
Whether you’re finding an advisor for the first time or switching to a new one, check out 8 questions to ask an advisor.
Key steps to finding a new financial advisor:
- Know the reason why you’re switching
- Review your current contract
- Meet with a few different advisors before deciding
- Tell your current advisor you’ll be switching
- Start your new relationship on the right foot