What to Do When Your Financial Advisor Switches Firms

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 how 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

Switching firms is a significant decision for financial advisors, often driven by a combination of professional, financial, and personal factors. Advisors seek environments that better align with their career goals, client needs, and evolving industry trends.

Common motivations include dissatisfaction with current firm policies, the pursuit of higher compensation structures, access to superior technology, or a desire for greater autonomy and flexibility in serving clients. 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 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.

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Pros and Cons of Following Your Advisor

A woman deciding whether to switch her financial advisor.

When your financial advisor decides to switch firms, you may face the critical decision of whether to follow them or remain with their previous institution. This choice can significantly impact your financial planning and investment strategies.

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 your financial advisor leaves for another firm, you do not necessarily have to follow them. Your current firm may assign a replacement advisor or give you the option to choose from several professionals who can continue managing your accounts and financial plan.

Before making a decision, review the experience, credentials and specialties of the advisors who are available to you. It can also help to ask how familiar they are with your portfolio, retirement strategy, tax planning needs and other financial goals, since continuity can be especially important if you have a complex plan.

You should also compare how each advisor communicates, how often they meet with clients and what services they provide beyond investment management. Fees may also differ depending on the advisor or service model, so confirm whether your costs would change if you stay with the firm.

Meeting with one or more potential replacements can give you a better sense of whether staying is a good fit. If none of the available advisors meet your needs, you can then compare other firms or consider following your former advisor if that option is available.

Ask Questions Before Your Advisor Leaves

If you learn that your financial advisor is leaving their firm, use the transition period to understand what will happen to your accounts and financial plan. Ask whether the advisor is joining another firm, whether they expect to continue working with existing clients and whether there are any restrictions that could affect their ability to contact you after the move.

You should also find out what happens if you stay with the current firm. Ask who would take over your accounts, whether your investment strategy or fees would change and how your financial records and planning documents will be handled. Understanding these details can make it easier to compare staying with the firm against following your advisor elsewhere.

If you are considering moving with your advisor, ask about the new firm’s services, fee structure, investment platform and any costs associated with transferring your accounts. Some investments may not transfer easily, and moving assets could potentially create transaction fees or tax consequences in taxable accounts.

Finally, make sure you know how to access your accounts and important documents independently of your advisor. Keeping copies of statements, financial plans and other records can help reduce disruption and give you more control while you decide which option is best for your financial situation.

Bottom Line

A financial advisor reviews the portfolio of a client.

When your financial advisor switches firms, you do not have to make an immediate decision about whether to follow them. Review the new firm, compare alternative advisors at your current firm and consider any differences in fees, services, investment options and account transfer requirements. Asking detailed questions before the transition can help you choose the arrangement that best supports your financial goals.

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 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.