Question: Eight years ago I hired a financial advisor because the rounds of layoffs at work were coming more regularly, and I wanted to know if my savings were enough for me to retire. The financial advisor began managing some of my accounts for me for a fee of 1%. This has been a significant amount per year, but the adviser helped me prepare for and navigate retirement, a cross-country move, and buying a new house/selling the old one, so I was happy for the most part. But my original advisor retired and I have been assigned to a new person, who has never reached out to me by email or phone to introduce herself or learn anything about me. The only communications I get are the quarterly invoices for the fees and email from the receptionist to schedule a meeting. (Looking for a new adviser? This tool can help match you with an adviser who might meet your needs.)
I have let this go on during the pandemic because I didn’t really have the mental bandwidth to deal with it, but now I want to take back control of my accounts and manage them myself — perhaps in consultation with a fee-based advisor eventually. In retirement, the fee for the financial advisor has been my biggest yearly expense, more than my taxes and more than my property taxes in a very expensive area and I no longer feel like it’s worth paying such a large fee.
I have called the financial firm that houses my accounts a couple of times to ask how I can get sole control back over the professionally managed accounts but I can’t seem to find anyone who can tell me how to do this. They seem perplexed and say they don’t know what I mean by a “professionally managed account” even though that’s how they are identified in my records. Am I using the wrong terminology? It seems like it should be a simple matter such as filling out a form for each account because that’s how we set it up to be managed in the first place, but I can’t seem to find the right form. I’d like to avoid calling the financial advisor and asking them to do it if at all possible. Any ideas on how best to proceed?
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Answer: First of all, let’s help you get those financial accounts back into your sole control — and then we will figure out how to find you a new financial adviser, if you want one. When you want to terminate your relationship with the financial firm holding your accounts, the language you should use is that you want to remove the adviser’s trading authority and transfer your account from the institutional adviser platform to a self-directed retail account, says financial planner Joe Favorito of Landmark Wealth Management. Basically, an institutional adviser platform is just the trading platform that registered investment advisers like Charles Schwab & Co, TD Ameritrade and Fidelity have access to. A self-directed retail account gives the investor the ability to trade stocks, mutual funds and ETFs on their own. To make sure you’re prepared when you request the change, have your account numbers, name of firm and name of adviser readily available when you call.
There are often management contracts that spell out exactly how to terminate your relationship with your adviser, so experts recommend referring to any paperwork you may have signed initially. Before making the switch, you might also consider requesting copies of your statements or any other transaction-related paperwork your current adviser might have. Aside from that, you don’t need to have a lengthy break-up talk — there aren’t many strings attached in a relationship like this, and so long as you don’t have any pressing questions or concerns for your current adviser, you can move on to controlling your self-directed account without looking back.
“I would find another institution that is clear on your objectives and then institute transfer paperwork to move the assets to your new account. Make sure it goes from one institution to another so that you do not take possession of the money, [because] if you do, that could become a taxable event and cause a few extra steps to initiate a 60-day rollover with your taxes,” says certified financial planner Don Grant at Fortis Advisors. And make sure the financial institution where your funds currently sit “liquidates the positions before sending the monies to the new account, otherwise you may need to pay fees to liquidate once at the new institution,” says Grant. Be wary of transfer fees that might accompany your switch and any tax implications like having to pay capital gains on cash transfers or tax implications that arise when transferring retirement accounts.
The next step is figuring out whether or not you want to use an adviser to help manage those accounts. (Looking for a new adviser? This tool can help match you with an adviser who might meet your needs.) “As far as whether or not that makes sense depends on your ability to address [financial] issues on your own,” says Favorito. But one thing is clear: Your current adviser is not meeting your needs. “There are a multitude of independent financial advisers who offer not only more engaging and comprehensive services, but also alternative fee structures,” says certified financial planner Kevin Cheeks at ImpactFi — who says resources like NAPFA, XY Planning Network, or the Fee-Only Network might be worth looking at.
And instead of the percentage-of-assets-under-management model you were using, you might want to try something else. Cody Garrett, certified financial planner at Measure Twice Financial, explains that some advisers provide comprehensive planning without managing any client investments. “This service model and terminology is advice-only and it sounds like the perfect fit for your expectations. Although an advice-only planner does not manage client investments, they provide specific investment advice to help you manage your own accounts,” says Garrett. Here’s what hourly and per-plan advice might cost you.