How to switch financial advisors and what you need to consider

How to switch financial advisors and what you need to consider

If you are considering switching financial advisor and you need some guidance, then this blog will explain how to switch financial advisors and what factors you need to consider.

Although it can appear to be a Sisyphean task, it can actually be broken down into quite simple, step-by-step actions.

First of all, are you sure you’ve given your advisor an opportunity to resolve your issues? Have you had an open and candid conversation with them? Do you know exactly where the issue lies? Switching advisors and moving investments can be a hassle, and may take some time. Think carefully before making this decision, but don’t accept mediocrity.

Recommendations

Recommendations from others are a great place to start. Do you have any trusted friends, family, or colleagues who have a great adviser? If someone you know is happy to put their name behind a recommendation, that’s a very good sign. Social media sites like Facebook and Twitter can also be great sources for recommendations, but peer endorsements are the most powerful.

Research

Search engines can be an information gold mine, but the results are dependent on which specific terms you search for. Looking at an adviser’s website can give you a feel for the types of services they offer. Quite often, they’ll also show you the key people you will be dealing with.

Unbiased and VouchedFor are great sites that help you find a local advisor. However, not all firms decide to register with these sites, so they don’t necessarily have all the information.

The FCA also has a membership register if you have already found a few firms you would like to compare.

Checklist

Research can be confusing, and it’s easy for firms to blend together in your mind. A checklist can be a useful tool for evaluating firms against one another. Here is an example checklist, where you can score firms out of ten and see how they match up.

Attribute Score
Independent and ‘whole of market.’
An award-winning firm
A Chartered adviser
A Chartered Financial Planning Firm
Offers low-cost investment portfolios
Will work on a fee basis
Convenient location
Deals with people like us
Has the specialisms we need
Profitable and well-established

 

Your own checklist can have as many criteria as you want, and you can delete categories which are not relevant to you. Evaluating firms is important. If you are going to switch advisers, you should take the time to make the right decision.

Location

Location is relevant to some people, but not to others.

The key is convenience. You don’t need to be able to stroll into your adviser’s office just by walking out your front door, but if you and your new adviser are in different cities, are they easy to reach by car or train? Do you always have to travel to see them, or will they come and visit you?

You can’t always judge a book by its cover, but if your new adviser’s office is tucked away in a back alley in the wrong part of town, or nestled in above the chip shop, it might be prudent to reconsider. Likewise, if their office is in a marble palace with fine art adorning the walls, you might question their extravagance.

People like you

In any financial advisory firm, you don’t want to be an outlier client, meaning that you don’t want to have too little (or too much) money. Ideally, you should be a good, middle-of-the-road client for the firm. If they have lots of other clients that are ‘just like you’, then their experience and expertise can bear fruit.

Ask if you can speak directly with some existing clients before committing yourself. If the new advisor isn’t keen on this idea, consider it a warning sign. Why don’t they want you to talk to their clients?

Specialisms

Do you have unique or unusual circumstances? If so, does the new firm need to have experts and specialists who can deal with them? If yes, then this should be a very important consideration for you.

Investment approach

Is the new financial advisor an ‘active’ investor utilising discretionary investment managers (DIMs)? Do they pick company shares or funds? Do they time the markets with buys and sells? Or do they believe in evidence-based investing and low-cost index funds?

Ask to see a typical client portfolio and look for the OCF (ongoing charge figure). Does it represent good value overall?

Making the change

If you do make the decision to leave your financial advisor, whether you let them know by phone, email, or post is purely down to your preference. At some point, though, they will ask for confirmation in writing for their own records.

They may try their best to keep you, offering you promises, inducements, or reduced charges. How you react to these offers is up to you.

It is natural that, once sacked, your financial advisor’s attention will wander away from your interests. The switch between old and new advisers should be made as quickly as possible to avoid ending up in limbo.

Your new financial advisor will ask you to sign new terms of engagement (they have various names). There will be other processes to undertake, including anti-money laundering processes. Your new adviser will ask you to sign Letters of Authority (LOA) to enable them to investigate and take ownership of your regulated investments.

These LOAs also enable your new advisor to turn off any charges and fees paid to your ex-adviser.

The entire process, from start to finish, should take between one and three months (possibly more).

Some investments are easier to move than others, mainly as a result of complex tax structures or capital gains tax (CGT) costs. This does need to be taken into account. Nothing is insurmountable, but some issues may take a long time and cause considerable consternation.

The key to a good financial advisor transfer is preparation and planning ahead. Don’t rush into things – probe and ask questions. The advisor is responsible for looking after your family wealth and savings, so treat it with the appropriate amount of seriousness.

If you need some more guidance, take a look at our blog on the Five signs that show it’s time to switch financial advisors – and how to do it immediately. 

 

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