What to Do When Your Financial Advisor Retires

Speaker 1 – 00:00
Welcome to EWA’s FinLit podcast. EWA is a fee only RIA based out of Pittsburgh, Pennsylvania. We hope all listeners
of this podcast will beneft as we deep dive into complex fnancial topics that we will make simplifed for you. And
we hope that this really serves as a catalyst so that you can make the best fnancial planning decisions for your
family and also save time.
Speaker 2 – 00:28
Today’s episode we’re talking about what to do if your fnancial advisor retires and why. This is a topic we’re
addressing is a lot of our recent clients have come to us because their current Advisor maybe of 10, 20, 30 years is
retiring. And a statistic that we researched is the average age. There’s several studies out there of a fnancial advisor
today is between the ages of 56 to 58. So some studies say 56, some studies say 58. So the point being is that a lot
of people, if you look at the wealth in America and the disparity in America, the majority of wealth is with people over
the age of 65. So a lot of people in retirement use fnancial advisors.
Speaker 2 – 01:10
A lot of younger people are still up in the air of whether they’re going to self manage or use their parents advisor or
go fnd a more modern fnancial advisor. So today’s episode we want to talk about what to do if your fnancial
advisor retires. Should you self manage, should you switch to a different advisor and just tips and tactics on how to
go about making that decision. So frst of all, let’s just start with the what are some of the options that a potential
client would have if they get the call that their.
Speaker 3 – 01:45
Financial advisor is retiring, then yeah, so a couple options. Number one, they can choose to just self manage their
investments. So whether it’s at their existing custodian that they had previously been working on or working with.
Excuse me, or a different one. Likely there’s going to be some sort of succession plan when your advisor retires. So
you can choose to stay on at the current custodian and maybe another advisor would help service your accounts
and kind of take over that relationship. Or the third option, you could seek a new fnancial advisor, be it at the same
custodian or a different one.
Speaker 2 – 02:18
Yeah. So let’s just say hypothetically let’s use Fidelity as an example. Like you have an advisor, maybe an ra, that
custodian through Fidelity, maybe a Fidelity advisor through their more retail channel. So the a common option
would be just to leave your accounts as is your fnancial advisor retires. That fnancial advisor, if they’re part of a frm
is probably introduce you to a successor like a junior advisor that’s going to take over. One option you have is you
can just, you could call the custodian and say, hey, I don’t want any professional management on this account.
Please remove this frm off my account. And your accounts will stay where they’re at. Account numbers will stay the
same, the tax documents, the history will stay the same and the fees will go away.
Speaker 2 – 03:07
Now all the work would then be on you to then manage moving forward. But that is going to be an option at most
custodians such as Charles Schwab, such as Vanguard, such as Fidelity. Where that may not be an option is if you’re
with a traditional wirehouse. Let’s just say a Merrill lynch or Morgan Stanley. They have different tiers. I believe it’s
called Merrill Edge that you would go into if you don’t want to, you know, work with a traditional advisor. And some of
the holdings you in may be proprietary. So if you’re thinking about switching from a traditional wirehouse, it would be
good to have that conversation once you get noticed that your advisor is retiring.
Speaker 2 – 03:48
So you have an understanding of what’s possible to switch out versus not because that could be more difcult
working with the 1-800 number than telling your advisor, hey, I’m going to move, get me ready to move, sell out of all
the proprietary funds, et cetera. So Kris, what would someone, let’s say that someone doesn’t want to self manage.
So we’ve talked through that’s a defnitive option. Someone could just call their custodian and say I don’t want to
work with an advisor. So the advantage of that is the fees would go down. They still have the fees of the funds
they’re in to deal with and then they obviously have all the time decision making tax management portfolio decisions
that would fall on them. But let’s say someone wants to move to a new advisor and that’s with a different custodian.
Speaker 2 – 04:35
Talk about the details and how important it is. What’s kind of a checklist do you want to go through in making that
transition from an overall planning tax? What other considerations should we be thinking about?
Speaker 4 – 04:49
Yeah, so there’s defnitely a lot that goes into it. I think the context of your planning is important too. So if you’re in
the accumulation phase versus if you’re somebody that’s in that category that you mentioned earlier, same age as
your advisor that’s retiring, maybe different considerations if you’re getting ready to unwind the accounts. I Think
defnitely from our vantage point consolidating accounts, it’s extremely helpful if we can get a concise summary of
where everything’s at, statements, just getting all of your housekeeping in good order, making sure everything. You
know exactly what you have frst and that you understand what accounts you have. From there, I think it’s really
whether you work with a team like ours or another fnancial advisor, as long as that information is clean, they’re
going to be able to their job and get everything swept over pretty smoothly.
Speaker 3 – 05:37
And really any RAA should be taking a lot of that work off your plate. So whether it’s covering any transfer fees,
submitting any transfer paperwork, all of that should be kind of done behind the scenes, outside of your kind of your
area of work.
Speaker 2 – 05:54
Yeah, absolutely. So that frst year, it’s very crucial. Let’s say someone’s transferring from Charles Schwab to Fidelity.
They’re going to have that year. Let’s say that’s in 2024. They’re going to have tax documents, especially if it was a
brokerage account, dividends and capital gain distributions. They’re going to have to go back to that old custodian,
grab those tax documents, plus have the tax documents in the current year. So sometimes people say, oh, I’m going
to wait till the year. Well, then you’re just kicking down the. Usually if you’re going to switch, it’s smart to do it that
year so it’s fresh of mind that fnal. That’s your fnal call it difcult tax year because you’re going to have places, tax
documents coming from different places. And then the goal in our mind would be consolidate everything in one
place.
Speaker 2 – 06:36
The, the benefts of that obviously would be fees would be time savings, coordination with one team being able to
log in, and then also cyber security. A lot of times we see cyber security threats because it’s hard to. When you have
stuff kind of spread out everywhere, passwords that you’re not, you know, keeping updating frequently or having dual
authentication. That’s where threats but at frst is if you have a reputable frm such as Schwab or Fidelity, or they
have the highest level of cybersecurity protection mechanisms where if you do get hacked, you’re still protected. You
can keep track of it in a much better manner. Okay, well, let’s discuss then. So anything else that you guys can think
of that’s important from a transitional standpoint.
Speaker 2 – 07:21
I’m just thinking like a lot of afuent clients, you know, potentially in their 60s, they probably have stuff in trust they
probably have, you know, benefciaries designated the right way. So we want to make sure that the new advisor has
copies of the trust that you put together, the estate planning so that those accounts can fow, the benefciaries can
fow and usually we can take this as a good opportunity to audit all of that planning you’ve done and make sure that
it’s still your intention to have everything set up the way it is. Anything else that you guys can think of before we
transition into how to side, assuming you are going to continue to use a fnancial advisor, what are good interview
questions, what are good considerations, what are good philosophical alignments that should be in place, etc.
Speaker 2 – 08:08
But before we go down that path, anything else you guys can think of just from the transitional standpoint?
Speaker 4 – 08:12
Yeah, I think we’ve been fortunate in a lot of the circumstances that like you mentioned a little bit ago at the start
from the new families we’ve gotten to work with that some of the previous advisors are involved in the process too
in the transition. But if that’s not the case, I think it’s important to be really intentional about the last, kind of the last
meeting you’re going to have with the advisor to really make sure that you understand what you have. So I think by
nature a lot of the people that we work with at least or a lot of people that have advisors hire them because they’re
busy. So nine times out of 10 whenever we’re sitting down with people, they don’t really know what they have.
Speaker 4 – 08:49
So I think unless your advisor is going to be involved with the next team, I think defnitely use that last meeting to
talk through just simply exactly what you have to make it easier on yourself.
Speaker 2 – 09:00
Absolutely perfect. Well, deciding what advisor to work with. So what are some in your guys minds, what are some
reasons that you should work with a fnancial advisor versus not. What would be your top of the list, top three
reasons why you should work with a fnancial advisor? Go for it.
Speaker 3 – 09:25
That’s a great question, Matt. I think the one thing you should be looking for and an advisor is someone that’s going
to help see your plan through your retirement throughout the rest of your life. You mentioned before but fnancial
advisors average age, late 50s, oftentimes clients are very similar age to their fnancial advisor. So when, by the time
that the advisor is retired, the client is either in retirement or approaching retirement, that’s often when they need the
most help, is when they start unwinding accounts and taking distributions. And oftentimes it can take, I mean
months Years, decades to build up that trust, understand the client’s family dynamics, everything that goes into their
fnancial plan.
Speaker 3 – 10:06
So when you’re looking for a new advisor, want to make sure that you’re seeing a team that’s going to be able to see
you through that retirement throughout the rest of your life, be it 20, 30, 40 years. Or do you have a team that’s in
place that’s going to be able to sustain that throughout that timeframe? And then also I’d be looking for again, fee
only fduciary RA that’s always going to be acting in your best interest, that doesn’t have any conficts of interest with
any fund company, insurance company, you know, want to make sure that the frm that you are with is aligned in that
standpoint with, you know, your goals and everything like that.
Speaker 2 – 10:47
Absolutely. I’ll just go down a list of. So I’d want to make sure if this was happening to me, that there is investment
philosophy, alignment. So you know, the basic rules of investing, asset allocation, diversifcation, staying in long term
are followed. I wouldn’t want someone toting they can beat the market. If they beat the market, great. I want to make
sure their main philosophies are asset allocation diversifcation and low cost investing through index funds or direct
indexing. Obviously I want them keeping up with the different indexes, benchmarks, you know, large cap against S
and P, mid cap against S&P 600 or S&P 400, small cap against S&P 600. I wouldn’t want them touting performance.
I’d want investment philosophical alignment of hey, we’re trying to get great returns but also manage risk. And more
importantly, we want the.
Speaker 2 – 11:38
I want them to make sure that, you know, that my balance sheet is basically supporting my life by design. And we’re
not just sitting on a pile trying to grow it and not having any tough conversations about, you know, what do you want
this money to do for you? So that would be the frst thing, I think the second thing would be extremely transparent
around fees, any kind of conficts of interest, how are you paid? I’m biased. I’d be looking for an REA where it’s a fat
percentage under management and all services are bundled in there. I want someone to handle as much as
possible, taxes, investments, insurance, everything under one roof if possible.
Speaker 2 – 12:15
And I think the most important thing honestly would be just the really, you know, tough conversations that most
advisors kind of just sit on the assets and say, hope the clients don’t spend as anything because Then you know, the
percentage, even though it goes down as the assets grow, it’s still a bigger pile. But I want someone to challenge me
and make sure that we’re, or utilizing this. Well, I’m living and involving my kids, kid, hopefully future kids, plural, but
involving them because obviously kids are a huge part of someone’s fnancial plan. So are you willing to work with
my children, my family? Do you understand the dynamics of the family and how important that is? Are you willing to,
you know, work within my estate plan?
Speaker 2 – 13:01
So I’d be basically looking for a comprehensive fnancial planner that can put as much as possible under one roof. I
don’t think there’s a reason to delegate if my time’s being wasted, I want someone to save my time where I’m not
going to meet, you know, 10 different professionals. That could almost be a full time job in retirement. Like you go,
you meet your fnancial advisor a couple times a year, then your CPA and then your attorney and then watch them
disagree about everything. That just seems like we see that very commonly. I want something that’s streamlined,
quarterbacked, stress free and you know, saving time, not wasting time. So that brings us to a fee perspective.
Speaker 2 – 13:39
So, you know, recently were a client, you know, had the option to stay in a low cost outft and they were going to
charge 0.3% and our fee was double that. It was about 0.6%. Ultimately, the clients decided to work with us. But
Chris, I know this was one with you. So what were the ration? What were the reasons why you think that client chose
to work with us for double the fee versus the other outft?
Speaker 4 – 14:11
Yeah, I, I would say it’s all the stuff you just kind of talked about. They’re nearing the distribution years, so it’s a
different game versus accumulating. So we demonstrated the importance of where you’re, how you’re unwinding
assets and which accounts you’re pulling from. All of that has tax implications. So doing that efciently is extremely
important. Don’t know how much detail we want to get into, but we discussed things like Roth conversion planning,
gifting, lifetime gifting, trust planning. So really showed that all of this, it’s a different, we’re not just growing the
money anymore. We have a system in place to distribute it. And not just distribute it, but for the legacy standpoint,
really trying to tie everything up. So I think again, we’re biased, but we think the cost of working with an advisor is
worth it.
Speaker 4 – 15:05
And they did too so they’re willing to.
Speaker 2 – 15:07
That was an asset manager that was just managing investments versus our proposition for 0.6% was doing their full
scope of fnancial planning, legacy planning for their kids, estate planning, doing their taxes, really understanding
from a whole level versus that other outft was just going to be, you know, managing and training their account. But
there was going to be no other services involved with that. So obviously apples and oranges of what we’re
proposing. And it wasn’t just a simple like, hey, use us, our portfolio is better. It was, that was a 2 second part of the
conversation. The, the in depth part of the conversation was around everything else.
Speaker 3 – 15:48
Yeah, you hit on a lot of things I was just going to add there. But I think the easy conversation would have been you
guys get in the room and you talk about the portfolio and the returns and everything like that. But like you said, it’s a
whole different set of tools when you’re in the distribution phase. So all the stuff you talked about incorporating the
kids, the legacy planning, the trust planning, like that is going to be incorporating more difcult conversations. But
ultimately, like that is your job as a fnancial advisor to be having those conversations and not just worry about
growing the accounts.
Speaker 2 – 16:17
So if you were to ask a potential new fnancial advisor three questions to gauge their wisdom, their philosophy,
whether they’re a good ft. I’m thinking of a good question, of several good questions. I want to discuss this. I would,
I would ask that advisor, probably the distribution stage, hey, if the market, you know, crashes like 2008 next year,
what’s your plan for my family to make sure that we stay on track? What’s the distribution plan? What changes are
made? How do you navigate me through that and just shut up and I can tell you the answer should not be, oh, let me
plan this out. Because a lot of times you need to gauge how that advisor is going to respond in stressful reactions.
Speaker 2 – 17:07
And if they have an understanding for your general balance sheet, good advisor, without any technology or calculate,
they should be able to give you a pretty close to, you know, accurate high level answer philosophically. And what
exactly would do.
Speaker 3 – 17:22
Yeah, I was gonna, I would ask what is your investment philosophy? And then just shut up. Because that is a
concrete answer that I should be expected to receive and that should almost be the same across all team members.
Like if I’m talking to like a fnance, a fnancial advisor and there’s a portfolio manager that’s in the room or in the
other room, like he or she should have the same answer as the person that I’M talking to face. Like having a frm
that’s aligned on an investment philosophy, what’s important to them, it’s not just kind of willy nilly like here’s your
accounts, like that’s super important. And that’s something that I would be looking for if I were looking for a new
advisor is having a frm that is kind of on the same page with all that stuff.
Speaker 2 – 18:06
I’d be looking for someone that’s not going to sell me. Like not tell me exactly what I want to hear, but tell me the
answer of what actually their belief is. I’ve been in a lot of meetings that feel like sometimes advisors or more
salespeople just try to give the right answer that client’s looking for, but not the right answer of what your actual
philosophy is and how you navigate them through the tough times. A lot of clients, if they already knew the right
answer, then they wouldn’t need you. So you always have to give the, you know, the right answer exactly how you do
it. Chris, how about you? What question would you be asking if you were interviewing a new advisor as.
Speaker 4 – 18:46
Like a retiree, like somebody.
Speaker 2 – 18:48
Yeah, let’s do both. One as a retiree or accumulator?
Speaker 4 – 18:51
Yeah, I would probably be, I think if I’m accumulating, I’m a little bit more, I don’t want to say fee sensitive, but fee
conscious. I want to make sure, like the internal expenses I’m not getting, not overpaying, and then also the cost for
the advice isn’t too much. So I want to guess this isn’t more so a question, but more concern. So I would ask just
what getting back to what Ben said, what’s your investment philosophy for somebody in their, you know, late 20s,
early 30s, you know, how could I. Most of what would you do in my shoes, simply. And then if I were distributing, I
would just ask, you know, how. How do we unwind this most efciently and just hear what they had to say. You guys
took two good.
Speaker 2 – 19:38
Ones off the Learning and fruit. Yeah, the fees. The fees are good. I would ask straight up, what are your fees? And
make sure. Obviously we’re highly, you know, in the behind the scenes know here. But make sure they disclose all
types of fees like they should be disclosing. What’s your advisory fee, which is say at 1%, what’s the internal cost of
the portfolio? If they’re using all Vanguard funds or index funds, maybe that’s 0.2%. Maybe they’re using mutual
funds, and that’s another 1%. You got to make sure they disclose that. Are there any conficts there? Are they getting
action off of some of the trails of the mutual funds, if they use mutual funds. And the third thing is, do they charge
any transactional costs or if the custodians charge those, do they cover those on your behalf?
Speaker 2 – 20:20
So, so there’s three types of fees. You typically have percentage of assets under management, typically that the
management fees of the funds inside of the portfolio. And then the third cost would be any kind of transactional
cost. And so I’d be looking for someone obviously with an advisory fee that’s competitive. So just that’s generally
speaking, you know, how we get paid. We always talk about the value proposition. We want to be 3x that fee every
single year. Secondly, the internal cost. We don’t believe in beating the market. We believe in riding with the market,
making tactical asset allocation and diversifcation moves, but doing that as low cost as possible. So it’ll be looking
for that. I think the average cost internally is 0.65%. We try to keep ours under 0.25%, almost a third of what the
industry averages.
Speaker 2 – 21:02
And the third thing is, you know, we cover all. This isn’t a pitch to us, but I’m just, I set this up exactly the way I would
be looking for someone else to do it if I was hiring an advisor. So I’d be looking for someone to cover all my
transactional fees. And that’s exactly what we do. If you’re with a big broker dealer, I mean, you could be paying them
a percent, you could be paying another percent to all the pay to play people behind the scenes, all those wholesalers
of those mutual funds. And you could be paying, you know, $15 a trade we’ve seen in some old broker dealer worlds
that can get really expensive really quickly, especially if you’re doing, you know, direct indexes. That could be
disastrous.
Speaker 3 – 21:40
Maybe a more philosophical question, but if I was sitting down with an advisor, let’s say I sat down with him or her,
and I said, hey, I want to retire at 50, I want to send four kids to Harvard. I want a gift. I want to do X, Y and Z. And my
goals were unrealistic. And if I asked them, hey, am I on track? Am I going to get answer that is what I need to hear
or what I want to hear. And is this advisor going to help me kind of prioritize my goals and help me work through an
exercise to understand what’s most Important for me.
Speaker 3 – 22:08
Too often I feel like advisors don’t do that and they’re left with like a hodgepodge of goals that a client may or may
not have that we can maybe help them get to, maybe not. But if we don’t help me establish what’s most important to
me, it’s going to be hard for me to get behind a fnancial plan that is working towards those goals. So I think that’s
really important in the initial meeting or in the frst couple times I’m talking to someone like hey, are they going to be
real with me if I come with a bunch of goals that I’m neither not equipped to work towards or are they not going to
help me prioritize what’s most important? That would be almost a red fag for me if they don’t give me that direct
feedback right away.
Speaker 2 – 22:47
I’m saving the best for last. I think, you know, I think the most important thing is to look for when choosing a different
fnancial advisor. It’s do you work with other people that are similar situation than me? Because if you do, you’re
already going to understand, have experience of what typically concerns are for my situation, for my net worth, my
income level and all of the data and hours you spent with other clients will beneft me directly because you have all
this perspective of how people have messed up, how they’ve done it. Well, do they purchase a vacation house? Do
they rent their vacation house? Did they do an irrevocable trust or revocable Trust? Did they 100% equities and then
they’re, you know, putting money in cash value life insurance because they’re in the high tax bracket.
Speaker 2 – 23:36
Like all of those different perspectives, I know they’re going to take care of me versus maybe I’m the lowest client,
I’m not going to get any service. Maybe I’m the highest client and they’re not telling me that and they have no idea
how to service. I know all these tax benefts I could get at this income level. So I think it’s really important to ask the
advisor. Tell me about your book. What are your assets under management? How many clients do you have? What’s
your philosophy? How many clients per advisor? Generally, you know, you want that about 100 to 125. And who are
those? Like are those physicians, are those executives, are those business owners, are those retirees, are those tech
people? All of those come with different concerns.
Speaker 2 – 24:22
And making sure that your advisor has the perspective to address your concerns I think is super important, almost
that will pay for itself. If I go to an advisor as a business owner that works with a lot of business owners I know,
right? Alone, they’re probably formulated a brain trust in all these meetings because typically an advisor, you hear all
these goals and stresses and problems that need to be solved. And so just that perspective coming to me, that in
itself will be worth the price of admission. And alone. So what do you guys think about that?
Speaker 4 – 24:54
I think you just remind, I think the capacity to take on new clients is extremely important. I think in any business
people want more, you know, more business. And for us that’s working with new people. We’ve seen environments
where people have way too many clients and it’s. You can’t keep up with it. So I think making sure that the team
you’re looking to join has the staff to actually handle your situation and give you the attention you should be getting
for the fees that you’re paying.
Speaker 2 – 25:28
I think another important thing is do you have your clients in the same portfolio? Do you have a model portfolio?
Because that’s gonna show that you’re convicted in what you’re doing. You’re not just telling people whatever they
wanna hear to get them as a client, you’re saying no. Here’s our philosophy. So just full disclosure. Ewa. We have a
custom portfolio that’s based upon risk tolerance. So 10% bonds, 90% equities, 20, 80, 30, 70, 40, 60, 50, all the way
up to 100% equity, zero bonds. And the importance of that is several fold. One, we’re doing the research that applies
to every client. You know, some of our partnerships, we’re making the trades and we’re doing those in batch.
Speaker 2 – 26:07
So hypothetically, if like the three of us were clients and were trading into a large cap position, I go frst, you go
second, you go third. I benefted most from that because the market works off of price to earnings ratio in the long
term, but short term it’s, you know, supply and demand. It drives prices. Well, I got in the lowest and you guys just
drove the price highest. So are you giving your clients as a whole best exit execution? Are you trading everything at
the same time so everyone gets the best execution? Do you have the technology to even do that? So I think those are
all super important questions that we’ve seen. No offense to, you know, older 58 or 65 year old advisor.
Speaker 2 – 26:46
Usually their book is each portfolio is different, it’s random and it there’s their team kind of, you know, hates it
because there’s It’s a service nightmare versus being able to focus on what matters. The one one relationship, the
conversation. Making sure the goals are driving and the values are driving the conversation along the way towards
the fnancial plan, not the other way where your. Your money’s doing this with skip vacation this year because the
market’s down. None of that. The goals have to be driving the plan.
Speaker 4 – 27:15
Some other good ones I’ve gotten are why did you choose your custodian? So we have good rationale behind that. I
don’t know if you want to go into that, but yeah, tell us why. So we, I. We use Fidelity and Charles Schwab is our
primary two. I think 90. Most. Most of them are at Fidelity. There’s. We could keep some at Schwab if people had
accounts there just for ease. So you keep your account numbers. But in terms of cyber security, they’ve been at the
forefront. So that’s kind of leading into another question I wanted to get to. But cybersecurity there at the front.
They’re one of the largest asset managers, so we can plug into their institutional research team. Then third, the
protections that they have above the federal limits to protect your money if something were to happen, you got
hacked.
Speaker 4 – 28:01
So there’s plenty of reasons why we chose who we chose. So I’d say one, why’d you choose your custodian? Two,
what kind of tech do you use? What’s your planning models? Just to hear what they say. I might not know what E
Money is or money got like what all these different techs are as a prospective client, but I’d want to know, like, why
did you pick them?
Speaker 2 – 28:20
At least are they secure? How do you share documents? How do you get my information secure?
Speaker 4 – 28:25
Yeah. And then third, what, like what protections do you have for cyber security? I think you did mention that a little
bit ago.
Speaker 2 – 28:30
Absolutely. But I think that is moving forward. Probably the most. One of the most important considerations you can
have save part of your money.
Speaker 4 – 28:38
But I think the program’s tech. Like I’ve always been kind of surprised whenever people ask me that, but I think it’s a
good question because it’s. It just. I don’t know. I never really think about it and it makes me think like, why. Why did
we pick those? And then I realized we had some pretty good reasons behind it. And I would. I would personally just
want to know what they’re using to. To show me everything.
Speaker 1 – 28:57
Thanks for tuning in to our podcast. Hopefully you found this helpful. Really hope this is as benefcial and impactful
to as many people across the nation as possible. So hit the follow button. Make sure to rate the podcast, and please
share with any friends or family members that would also fnd this benefcial. Thank you very much.