When Should You Switch Financial Advisors?

The Steps to Switch Financial Advisors in Order

The right moment to switch financial advisors is when your adviser's fee structure, scope of services, or disclosed conflicts no longer serve your financial goals.

Our suggested order:

1. Review your current advisory agreement for termination terms and fee terms.
2. Research prospective replacements on official public registries.
3. Open your new account at the receiving firm.
4. Submit a Transfer Initiation Form to your receiving firm so they pull the assets directly.
5. Pause all buying and selling while the automated transfer runs.
6. Confirm delivery of your holdings.

Checks That Show the Advice or Fees No Longer Fit

According to Investor.gov, an investment adviser is a firm or person that provides investment advice about securities for compensation. Investor.gov states that investment advisers are required to act in your best interest and not put their interest ahead of yours. Even so, the way advisers make money creates conflicts of interest to ask about (Investor.gov).

Evaluate five baseline questions to determine whether your professional relationship still works:

• Services you need: Does your current adviser provide ongoing advice about buying, selling, or holding investments alongside broader financial planning, or has your situation outgrown their service limits?
• Cost and fee models: Are you paying an ongoing fee based on the total value of all assets in your account when your transaction volume or service needs have dropped?
• How the adviser is paid: As outlined in Investor.gov's guide to Form CRS, brokers are generally transactional and paid through commissions or markups per trade, while advisers typically charge an asset-based fee. From a cost perspective, you may prefer an asset-based fee if you want ongoing advice or want someone to make investment decisions for you.
• Disclosed conflicts: Does the way the adviser makes money create conflicts of interest to ask about? Our guide on financial advisor conflicts of interest outlines how these arrangements operate.
• Disciplinary record: Has the individual or firm accumulated legal or disciplinary history?

If your adviser cannot clearly justify their fees or resolve disclosed conflicts, switching to another professional is a reasonable step.

What to Read in Your Advisory Contract Before You Leave

Before contacting a new firm, locate and read your original investment advisory agreement. Investor.gov notes that the exact services and fees you receive depend on the contract you negotiate. The contract governs the formal terms of your relationship, including termination procedures and fee terms.

While your contract contains legal termination mechanics, your adviser's Form ADV Part 2A brochure details their broad billing practices. The SEC Form ADV bulletin states that Part 2A is a plain-English narrative brochure containing 18 standardized items. The brochure covers fees and compensation, explaining how the firm is compensated, its fee schedule, whether fees are negotiable, whether fees are billed directly or deducted from client accounts, and other fees such as brokerage, custody, and fund expenses.

Form ADV Part 2A does not contain your specific termination clause. You must examine your signed contract to identify any notice requirements. If you have questions about ending the agreement, ask your adviser in writing to confirm the steps required to terminate the contract.

How to Check the New Adviser

Selecting a replacement adviser requires independent verification before you sign an agreement or open accounts. Advisers generally must register with the Securities and Exchange Commission (SEC) or state regulatory authorities. Investor.gov advises investors to check both the firm and the individual representative.

You can research both the individual and the firm using the Investment Adviser Public Disclosure (IAPD) database, which is also accessible via the Check Out Your Investment Professional tool on Investor.gov. If the professional operates as a registered broker or dual registrant, you can review their background on FINRA BrokerCheck.

When reviewing records on IAPD, examine three filings:

• Form ADV Part 1: A structured form detailing the firm's business, ownership structure, client types, employees, business affiliations, and disciplinary events involving the adviser or its staff.
• Form ADV Part 2A Brochure: The primary disclosure document covering 18 standard items, including advisory services, assets under management, fee schedules, methods of analysis, risk of loss, and a ten-year history of material disciplinary events. Our breakdown on how to read Form ADV explains each item.
• Form ADV Part 2B Brochure Supplement: A disclosure detailing the specific individuals who formulate investment advice, have direct client contact, or exercise discretionary authority. It lists their educational background, business experience over the past five years, disciplinary events, and other business activities.

Reviewing Form ADV Part 3, also known as Form CRS, provides a summary of the firm's services, fees, conflicts, standard of conduct, and disciplinary history. You can use these disclosures to prepare relevant questions to ask a financial advisor during introductory meetings, or reference our guide on how to choose a financial advisor.

How the Account Moves

According to FINRA, most customer accounts move between broker-dealers through ACATS, and cash, stocks, bonds and listed options are readily transferable that way.

To begin an account transfer, you complete a Transfer Initiation Form (TIF) and submit it directly to your receiving firm. Once submitted, validation and delivery between broker-dealers generally takes about three to four business days. Transfers originating from non-broker-dealers, such as banks, credit unions, or mutual fund companies, generally take more time. Furthermore, accounts that require a third-party custodian, like an individual retirement account (IRA), may require additional processing time.

A receiving firm is not legally required to accept your account. The most common reason a firm rejects a transfer involves credit policies, but rejections also happen when an account holds nontransferable assets. Nontransferable assets include proprietary products exclusive to the delivering firm or third-party mutual funds that lack a selling agreement with the new institution. FINRA rules require firms to notify customers of any nontransferable assets and provide alternatives.

While the transfer is actively processing, avoid buying or selling securities. FINRA warns that buying and selling during an active transfer often complicates and delays the process, and some firms freeze all trading in the account until the transfer completes.

Retirement Money: Direct Transfer vs a Check to You

Moving retirement assets requires careful attention to tax administration rules. According to the Internal Revenue Service (IRS), most pre-retirement payments from a retirement plan or an IRA can be rolled over by depositing the funds into another eligible plan or IRA within 60 days.

You can also arrange for your financial institution or retirement plan to directly transfer the payment to another plan or IRA. The IRS states that the one-per-year rollover limit does not apply to rollovers from traditional IRAs to Roth IRAs (conversions), trustee-to-trustee transfers to another IRA, IRA-to-plan rollovers, plan-to-IRA rollovers, or plan-to-plan rollovers.

Under IRS rules, if taxes are withheld on a distribution paid to you and you roll the money over within the 60-day window, you must use other funds to make up the withheld amount.

Because the tax effects of selling investments in taxable accounts or distributing retirement funds depend on individual circumstances, consult a qualified tax professional before initiating any liquidation.

Our Takeaway on When to Switch Financial Advisors

In our editorial judgment, the decision to switch financial advisors should be driven by measurable gaps in service, misaligned costs, or unaddressed conflicts of interest.

Review your advisory contract for termination rules, verify your new professional on IAPD or FINRA BrokerCheck, open your new account, and let the receiving institution initiate the transfer via ACATS. This process applies to retail clients working with SEC-registered or state-registered investment advisers and broker-dealers across the United States.

Your next concrete step is to locate your current contract and read its termination clause before asking your new firm for a Transfer Initiation Form.

Who This Is Not For and What Would Change the Answer

This transition guide is not intended for investors seeking to switch financial advisors simply due to normal, short-term market declines. A short-term market move is not by itself a check that shows the advice or fees no longer fit.

Certain contractual or portfolio conditions can change the decision to switch:

• Termination charges: If your current advisory contract contains termination charges, that cost can change the answer.
• Proprietary, nontransferable holdings: If your portfolio holds proprietary funds, the receiving firm is not required to accept those nontransferable assets.
• Pending retirement plan events: A pending tax event can change the timing of your switch.

Asking both firms about your holdings and contract terms beforehand shows you costs and trading freezes before they surprise you.

Frequently asked questions