From time to time, prospective clients reach out to us because they’ve grown dissatisfied with their current investment advisor or money manager. This can be because they don’t agree with the advisor’s investment management approach (more on this below), the manager has appeared in the news in an unfavorable light, or because the client discovers that their values and those of the advisor don’t align.

But in almost every case, the prospective client is uncertain about how involved a move to a new advisor will be, and how long it will take.

So, we’re sharing with you today an outline of the steps involved in transitioning to a new advisory relationship.

First, Your Homework
If you’ve decided to change advisors, you’ll want to interview several to make sure that your new firm is a “good fit” and will meet your needs. Because this will be a personal, hopefully long-term professional relationship, chemistry is important. Your advisor should be someone that you know, like and trust.

Also, as part of your interview, you’ll want to ask him/her to share with you their investment philosophy. Broadly speaking, advisors’ investment philosophies fall into one of two camps:

  • “active”, meaning they believe that it’s possible to consistently “beat the market” through security selection (aka stock-picking) and market-timing; or
  • “passive”, meaning that they believe consistently out-performing the market is very difficult, and that investors (and their advisors) should therefore look to earn the market return in the most cost-effective and tax-efficient manner.

We’ll share our thoughts on this active vs. passive philosophical divide with you in the coming days.

Getting Ready to Move
Once you’ve selected your new advisor, you’ll want to gather together information about your current accounts and investments:

  • Copies of complete recent statements for each investment and retirement account you have
  • If your current taxable/brokerage account statements don’t include cost basis, obtain that information from the account’s current custodian
  • For any employer-sponsored retirement plan accounts like a 401(k) or 403(b), an overview of the menu of available investment options

Putting Things in Motion
Your new advisor will have you sign new account application forms, and “transfer of asset” forms. The recent statements for your existing accounts will be included with this paperwork to ensure that all of your assets transfer over.

They’ll then submit your signed forms to their custodian (for independent advisors, the custodian is typically Fidelity, Charles Schwab, TD Ameritrade, or Pershing).

The new custodian will initiate an electronic ACAT (Automated Customer Account Transfer) for your assets “in-kind”, meaning typically all of your investments will be moved over without anything needing to be sold.

Once your new accounts are opened, you’ll be able to view them online at any time, and also decide whether you’d like to receive account statements in paper or electronic form.

Going Forward
Once your assets have been transferred over to your new account(s), you should discuss how your advisor plans to implement the investment strategy you’ve agreed with them, and whether there will be any tax consequences.

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