July 12, 2023

5 Tips to Take When Switching Wealth Management Firms

Between sharing personal and professional goals, creating a financial plan, and maintaining systematic savings habits throughout the years, building a strong relationship with a financial advisor and their team can take tremendous time and effort. Changing wealth management firms can be a difficult but potentially necessary decision if your needs are not being met, or if the value can be extended even further with a new firm. When deciding to make a switch, the following should be considered to help ensure a smooth transition of assets:


1. Review Your Original Letter of Engagement


When you first became a client of your existing firm, you were likely sent disclosures and documents pertaining to your advisor-client relationship. Be sure to review these in great detail before initiating a switch. Some firms require a certain notice to ensure account transfers are processed smoothly. Other firms may require an official written notice and will not accept email correspondence. Does your current firm charge an annual fee? Find out how the fee is assessed and if you will be reimbursed at all, depending on when you were charged and when you are making the switch. Be aware if there are any termination or transfer fees that will be incurred upon making a switch and have direct knowledge as to who will be responsible for paying such fees if they exist. Hopefully, the new firm taking over will cover all transfer fees regardless of when they are incurred.


2. Communicate with Your Existing Financial Advisor


If you have developed a relationship with your existing advisor, a professional courtesy notifying them of your switch is encouraged. Giving the advisor direct feedback for why you are making a switch can help them improve their existing services and processes, or if it’s because a matter of consolidating from two advisors down to one, sometimes these are very easy conversations.


3. Gather Recent Account Statements


To hold for your personal records, be sure to gather an up-to-date copy of all account statements before facilitating a switch. After keeping a copy for yourself, send all account statements to your new wealth management firm and allow them to facilitate the transfer process, getting most of the work off your plate. If you are transferring a non-qualified brokerage account, don’t just gather a statement that shows the account balance. Be sure to track down a statement showing the account’s cost basis, or original price for which the asset was required. This will be necessary for your new firm to help coordinate correct tax planning with your CPA when the time comes (if the tax basis does not transfer between custodians).


4. Check Regarding Sales Charges, Proprietary Funds, and Surrender Charges


While many ETFs, mutual funds, and investment options can be easily transferred, there are certain investments that may be exclusive to your former advisor’s firm. Be sure to inquire about the necessary steps to transfer those funds, as there may be additional steps to take, or time required to fully liquidate your position. Additionally, certain assets (annuity contracts, for example) may be subject to surrender fees if liquidated before a certain period. Having all this knowledge before initiating your switch will help ensure that you and your new wealth management firm are on the same page.


5. Allow Your New Firm To Actually Facilitate The Switch


More likely than not, your new wealth management firm will be assisting in filling out the required paperwork and ensuring the transfer process goes smoothly. If switching from one investment custodian to another, be prepared to wait a few business days before regaining access to your accounts while they are transferring to the new provider.


Keeping, at least, these steps front of mind will help ensure a smooth transition of assets to another firm.

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Securities and advisory services offered through EWA LLC dba Equilibrium Wealth Advisors (a SEC Registered Investment Advisor).
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