When (and How) to Switch Financial Advisors

While the performance of your investments over time is an obvious metric by which to judge your financial advisor, there are a few other factors you may want to consider when deciding if your relationship has long-term potential.

Here are some signals you may not want to ignore — and a quick guide on how to switch advisors if you decide to do so.

Signs it might be time to change financial advisors

1. You’re afraid to call your financial advisor

If you’re having trouble picking up the phone to ask a financial question, that’s a bad sign. “If you’re not calling because you don’t think your concerns are important, or you feel like, ‘they’re too busy — I don’t want to bother them,’ those are big red flags,” says Patricia Jennerjohn, a certified financial planner with Focused Finances in Oakland, California.

Ask yourself, why are you afraid to call? If past calls weren’t promptly returned or the conversation felt rushed once you connected, then it may be time to examine whether this is working out. “Some may feel like they are small potatoes compared to their advisor’s other [wealthier] clients … but you shouldn’t feel that’s a problem,” Jennerjohn adds. “This is all the money you have in the world, and that deserves full attention.”

» Ready to move on? Compare the best personal financial advisors

2. Your financial advisor doesn’t listen to you

Jennerjohn has a client who is two-timing with her because she can’t work up the courage to break with her other financial advisor. “My client says, ‘I make requests and suggestions, but he just brushes me off,’” she says.

Often, clients can be awed by a fancy suit and office and a barrage of smart-sounding advice that goes right over their heads. “It’s kind of like, ‘don’t question the doctor, just take the prescription,’” Jennerjohn says. “They feel intimidated to stay with this person.”

» What should you expect? Learn more about what financial advisors do.

3. Your financial situation is changing, but the advice isn't

Similar to not hearing you is not changing financial tack when a major life event is on the horizon, such as retirement. Some advisors get stuck in the “accumulation phase,” rather than preparing for the time when your investment savings replace a steady paycheck, says Celia Brugge, a certified financial planner with Dogwood Financial Planning in Memphis, Tennessee.

“You’ve been saving all this money, but it’s in different pots of money — some may be in taxable accounts, maybe you’re remarried and you’ve got his-and-her money,” Brugge says. “How do you decide what to take out, when, and in what order should the accounts be used? Those become the big questions now.”

» Learn more: How much financial advisors cost

4. Your financial advisor only calls to trade

Another red flag: You only hear from your advisor when they want to execute a buy or sell order on your portfolio. That may be a sign your advisor is only interested in the fees they may pocket by trading on your account, Jennerjohn says.

It’s important to understand how your current or future advisor makes money. Some make money by receiving a commission on products they sell; others charge clients a percentage of the assets they manage (typically around 1%). Many clients prefer a fee-only advisor who charges an hourly rate or a flat fee for services and isn’t inclined to steer you toward an investment for which they'll earn a commission.

If you feel your advisor is only looking to make a quick buck off you, it may be time to say goodbye.

How to switch financial advisors

Emotionally, breaking up with a financial advisor or financial consultant may be hard to do. But logistically, switching financial advisors can be pretty straightforward — if you know what to look out for.

Find a new advisor

The first step here is obvious: You can't jump ship without a plan in place. When searching for a new financial advisor, consider what aspects of your current relationship you've been unhappy about. Are you looking for deeper guidance on long-term savings? Do you want to work with someone who has a more hands-on approach? Would you like your new advisor to have a record of better returns? (More on how to choose a financial advisor.)

Jot down your needs so that you can have them handy when you start interviewing prospective advisors. And keep in mind that the term "financial advisor" isn't regulated by law. This means it's especially important to ask any candidates if they are subject to fiduciary duty as well as what their certifications are.

» Need some help getting started? 10 questions to ask a financial advisor

Check your old advisor’s contract for fees

Before you cut ties, make sure you understand the financial ramifications of the breakup. A great place to start is checking your old advisor’s contract to see if there is a termination or transfer fee so you know if and how much you’ll need to pay. There also may be additional costs or tax considerations if you are moving assets from funds managed directly by your old advisor’s company. Your new advisor can be a great resource in walking you through the fine print.

Additionally, both your old firm and the new firm must be involved in the actual transfer of your assets. The U.S. Securities and Exchange Commission suggests that you keep on top of communications between both parties to ensure that the process — which includes the submission of a Transfer Instruction Form (TIF) — is promptly and accurately completed^[0]

Download your records and paperwork

However your current firm or advisor operates, make sure you've downloaded and requested any transactions, paperwork or contracts that you may need to reference in the future. You may be able to access these via a portal if your firm has one, or you may need to request them directly via email or phone. Make sure to review these records for accuracy. This is critical because you'll need to have correct statements to reference for tax-filing purposes and in case you are ever audited by the IRS.

Make the switch