When you're working with a financial advisor, it's critical to work with
somebody who has the skills and expertise you need, and it's also important
to have somebody who you trust[and who's a good fit for you personally].
So, that's what we're going to talk about here. By the end of
the video, you're going to understand what it looks like to make that
change, you'll see some of the costs and pitfalls of changing advisors,
you'll maybe get some validation on when it's to move on,
and we're just going to hopefully make it all go smoothly for you...
So, starting with some of the biggest costs down to "less big"
costs, we have taxes. If you have investments that you've been holding for
many years, there may be big gains in those investments, so if you
have to sell, that can generate a big tax bill for you.
Sometimes that's what you have to do to switch advisors, and that's not
always the case, but if it is... You want to be aware of
this. Now, in retirement accounts like an IRA or a Roth IRA,
this is not an issue because it's typically not a taxable event to
sell your investments in those accounts. But if you have taxable accounts
like an individual or a joint account, there may be consequences when you
sell. One of the ways around this is to move the assets "in
kind" That way, you don't have to sell everything to generate cash and
move the cash. You can move the actual investments themselves or the shares
of mutual funds, for example, over to your new advisor.
There are a couple of other reasons to do that, and we'll get
to that in a second. The next might be annuity surrender charges. If
you have money in an annuity, it may cost you money to take
that out. The insurance company may charge you a penalty if you take
withdraws within a certain number of years, and those penalties can last
seven or 10 years, and they can be substantial. It might be
8% of the amount you take out, for example, it just depends on
the annuity you have and how long you've had it.
One of the ways to manage this is to possibly wait it out.
If you only have one or two years left before that surrender charge
goes away, you might consider just waiting, and another idea is to look
at doing your "free amount" each year. You might be able to take
10% of your account balance out each year without incurring surrender charges,
so that's another way to approach this and hopefully avoid some of the
costs that you don't need to pay. Next, we have commissions to liquidate.
If you have a lot of stocks, sometimes you come across people with
30 or 50[or many more] stocks in one account, if they're going to sell
that, sometimes the old broker is going to charge a kind of high
fee to sell those stocks. That can generate a lot of cost for
you that again, you're on your way out the door, it doesn't feel
good, and you just don't want to pay that money. So,
a way around that, again, is if you transfer those assets in kind,
your new advisor can potentially sell those investments, possibly without
any commission or maybe with much lower commissions, so talk about that
and look into that before you make a decision to do anything.
Next, we have your time, and it certainly does take time to do
all this. You have to do agreements and you have to gather information
and fill out forms, and what I'd say about that is that
we try to make it as easy as possible for you,
but you do have to do a couple of things, so ideally,
you get this right and you work with the right. Advisor,
who you can have a long term relationship with.
This isn't something that you're going to do every year or every couple
of years. Hopefully, it's many years or many decades[or the rest of your
life] that you end up working with your new advisor.
Then, there are a couple of other things and little fees that just
might hit your accounts. There are transfer out fees that might be $50
or $100 or more, you might be paying IRA custodial fees,
all of those things can just kind of ding you and they don't
feel good. But again, we're hopefully not going to do this very often
in your life, so that in the big picture, hopefully it's not going
to affect you significantly. If we look closer at this "in kind"
transfer, there are a couple of good reasons to do this.
One is again, it can manage those taxes, so that way you're not
selling everything at once. You might need to sell eventually, perhaps that's
part of the reason you're changing advisors, but your new advisor can maybe
pick when to do that or work around
certain positions at least temporarily, so that you don't get a big huge
tax hit in one year. The. Other reason is, again, it can manage
those fees on commissions. And a third reason that wasn't listed before
is that it keeps you in the market.
If you have investments that you're going to sell and convert to cash
before you transfer to a new advisor, you might be out of the
market, and that's a good thing if the market goes down.
But if the market is going up, like we hope it does most
of the time, then being out of the markets for a while can
penalize you. That's one more reason to look at these "in kind"
transfers. So how do you change? Just to quickly breeze through these:
Make sure you get the right advisor next. So ask a lot of
questions and have conversations to make sure it's a good fit.
You also want to review your agreements with your existing service providers,
your advisor, whatever brokerage or insurance providers you're using. You
want to understand what exactly the cost might be, what commitments you
might have made so that there are no surprises.
Then, you engage with the new advisor. That's a little bit of paperwork,
hopefully it's easy, maybe some e signatures to open up accounts.
Then, you're going to provide statement copies and other information. If
you're transferring accounts in particular. This helps to make that all
happen. You don't have to do everything alone! You can lean on your
new advisor, they can do conference calls with you and help you speak
the language so that you get all of this done efficiently and effectively.
And then when you submit a transfer request, in many cases,
you're done. Everything happens behind the scenes. You just give some paperwork
or an electronic signature to your new advisor, and things start happening
for you. Before you close your old accounts, it's often a good idea
to gather information. Get those old historic statements and maybe your
tax documents, any other information that you might want to have on file
just before you close that account, and it gets more difficult to get
that information. So when is it time to move on? If you're asking
that question, maybe it's time. A lot of times, it's lack of trust.
Whatever it might be, maybe you've worked with somebody for a number of
years, they've done good things for you, but just something changed, and
if trust gets ruined, it's often hard to get back and you just
might be uncomfortable, so if that's the case, you can consider moving.
Same goes for the wrong vibe. If you're just not connecting and communicating,
this is somebody who you are trusting with something very important,
and they need to also understand you, so if that's not happening.
You can move on. Some advisors only talk about investments or manage investments,
and that's okay, but if you want more than that, maybe you want
somebody to help you with retirement income planning or figuring out what
to do with your mortgage. Then, maybe you need an advisor who can
have those discussions with you. Then, there are sometimes advisors who
are just charging high fees. If you're not getting value for the fees
you're paying, it's definitely worth shopping around and figuring out what
else is out there. Some advisors are unresponsive, it's kind of surprising,
but I guess they don't return phone calls or emails for some reason,
and if that's happening, then it's definitely a good reason to move on.
And then some advisors may be taking risks that you think are unreasonable,
and if you're in that situation, definitely a good first step is to
talk with your advisor and make sure that they understand what you want
to do with your money. But again, if that breaks your trust or
if they're not following your instructions, then you need to move on and
get your risk more in line with what's right for you.
I hope this information has been helpful. Again, the idea is to manage
those costs and be aware of some of the surprises that might pop
up as you go through this process, and just to make it as
easy as possible to get with a new advisor who can be a
long term resource for you. Please subscribe to this channel. It does not
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