When your financial advisor changes companies, it can be a moment of uncertainty, leaving you with questions about the future of your investments and financial plans. This situation is not uncommon, as advisors may switch firms for various reasons, including better opportunities, changes in company culture or personal growth. As a client, it’s important to understand your advisor’s transition might affect your financial strategy and what steps you should consider taking. You might wonder whether to follow your advisor to their new firm or explore other options.
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Understand Why Financial Advisors Switch Firms
Financial advisors often change firms for a variety of reasons. More specifically, their reasons may include:
- Better pay: Sometimes advisors may leave in pursuit of better compensation packages, including competitive salaries, bonuses or commission structures that can enhance earnings and career satisfaction.
- Career growth: Desire for enhanced career growth opportunities, such as robust training programs, mentorship or a clearer path to advancement can also motivate an advisor to switch firms.
- Company culture: Alignment with company culture and values can also influence an advisor’s decision. They may prefer a firm that reflects their personal ethos.
- Improved resources: Access to better resources and technology can also motivate an advisors’ move, as firms with cutting-edge tools and platforms enable advisors to serve clients more effectively.
- Structural changes: Changes in company structure or management, such as mergers, acquisitions or leadership shifts, may prompt advisors to seek stability or a more favorable working environment elsewhere.
Consider Following Your Financial Advisor to Their New Firm
When an advisor changes firms, you should understand how their move could impact your accounts if you decide to follow them to their next firm.
Depending on the type of investments or accounts held, clients may have to transfer assets to a new custodian if they wish to keep working with the advisor. Certain products, such as proprietary mutual funds or private equity offerings, might only be available at specific firms, so moving could mean leaving those behind.
Additionally, clients should check whether there are account closure fees, transfer restrictions or specific requirements related to tax-advantaged accounts, such as IRAs, that could come into play if they opt to leave their existing firm to follow their advisor.
Switching to a new firm may also involve a few administrative steps. When transitioning accounts, clients may need to complete transfer authorization forms, which allow assets to move to a new custodian. The timeline for this process varies depending on the assets held and the firms involved, but it generally ranges from a few days to a few weeks.
Pros and Cons of Following Your Advisor
When your financial advisor changes firms, choosing to follow them can offer clear advantages, including:
- Consistency in financial strategy: Moving with your financial advisor allows for continuity in your financial plan. This can help avoid disruptions in your investment approach, as the advisor is already familiar with your goals and financial background.
- Trust and familiarity: Established trust with an advisor can be beneficial, as the relationship is built on past experiences and shared understanding, potentially easing transitions and minimizing adjustments.
- Simplified communication: Switching firms with your advisor may streamline communication. Since the advisor already understands your preferences, there may be fewer initial discussions and clarifications, making the transition smoother.
However, there are potential drawbacks that you'll also want to weigh when you're thinking about following your advisor to a new firm, such as:
- New fee structures: Different firms may have varied fee arrangements, potentially leading to increased costs or altered service terms. Understanding these changes beforehand is advisable to avoid unexpected expenses.
- Potential for limited investment options: A new firm may have different investment offerings, which could impact the range of products available to you, especially if the firm specializes in a particular asset class or investment style.
- Possible service adjustments: The firm's policies and procedures may affect the level of service or access to tools previously available, which could alter your experience and comfort with the advisor’s new platform.
Review Alternative Advisors at Your Current Firm
If following the advisor to a new firm doesn't seem appealing, clients can consider staying with the current company and working with another advisor. Many firms maintain detailed records of client needs and preferences, which can allow for a seamless transition to a new advisor.
Additionally, large financial firms often have in-house specialists in various areas, such as retirement planning, tax strategy or estate management, which may provide clients with access to broader expertise. Meeting with potential advisors at the current firm can offer a sense of whether a new advisor could fulfill your specific financial objectives.
Ask Questions Before Your Advisor Leaves
If your advisor is changing firms, asking the right questions can clarify how the move will affect your financial plan. Start by asking why they decided to switch firms and how this aligns with their professional goals. Inquire about any changes to the services or products they can offer at the new firm, especially if you rely on specific investments or proprietary products.
It's also helpful to ask about any new fees, transfer costs or account minimums that might come with the move. Understanding whether your accounts will need to be transferred and if there are any tax implications for doing so is essential. Additionally, confirm if your advisor's approach or investment philosophy will shift with this transition and how the new firm's resources may impact their ability to manage your portfolio.
Finally, ask about the support you'll receive during the transition and the timeline for moving your accounts if you decide to follow them. Clear answers to these questions can help you make an informed decision on whether to stay with your advisor or explore other options.
Bottom Line
When your financial advisor changes firms, it opens an opportunity to evaluate the direction of your financial plans and your relationship with your advisor. By understanding the reasons behind their move, assessing how the transition impacts your accounts and considering alternative options, you can make an informed choice about whether to follow your advisor or remain with your current firm. Taking time to review your goals and ask thoughtful questions can help maintain a path that aligns with your financial objectives, regardless of any shifts in your advisory relationship.
Tips for Financial Planning
- A financial advisor can help you create a plan to set and reach different financial goals. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now.
- When creating a financial plan, you should consider the cost of living, especially if you want to move someday. SmartAsset's cost of living calculator can help you see how prices for essentials vary by location.
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