User:CAsage/How to leave your advisor

 describes how you can leave your financial advisor.

Reasons to leave
People may want to leave their current investment advisor for many reasons. People may inherit a complex portfolio along with an advisor, or feel committed due to social connections. Your advisor may have retired, and the replacement no longer meets your needs. High fees are most often the motivation, coupled with an increasing understanding of how a simple portfolio with low fees can be suitable, sufficient, and offer better long term return.

How much do you lose to annual fees after many years? (to complete)

How to leave
Cost Basis: Before you alert your advisor, download all your current statements, including the cost basis and “unrealized Capital Gains” for your brokerage accounts. It is possible that after your account is closed, you will not have access to this information and you need it for tax filing.

Inform your broker politely that you are transferring, the decision has been made, and thank them for past services. You do not need to defend your decision or continue any discussion. In particular, citing “fees” may initiate more sales pressure from former advisor. You may inform them that you have decided to go in a different direction or manage your assets yourself. Do not feel obligated for any additional discussion aka pressure. Generally, one can inform your broker via email or a phone call.

If you have a brokerage that has optional advisors (e.g Schwab, Vanguard PAS) then simply direct your brokerage through Customer Service to discontinue or terminate the advisor authorization and access effective immediately, and you’re done. No transfers needed. Review your portfolio and update as needed.

Holdings: Determine which of your current holdings can transfer to your new brokerage. Assets that cannot transfer may include proprietary funds, OTC stocks, or individual mortgage backed securities. These must be liquidated. There are probably fees to sell each asset, which may be less if you transfer them to a larger brokerage house and then sell them. There may also be an account closure fee. Some brokerages may reimburse some fees (e.g. Fidelity or Schwab may reimburse ACAT fees). In the long run, you will be ahead with a lower cost portfolio without high expense ratios and AUM fees.

Capital Gains: Review the holdings in your brokerage accounts, and determine the Capital Gains, often described as “unrealized Capital Gains”. Any assets sold at a loss offset an equal amount of gains, and assets sold at a gain will be taxable. Holdings you transfer in kind are not taxed (a transfer is not a taxable event). Note that for Rollover or Roth IRAs, liquidating holdings is not a taxable event, so Capital Gains are irrelevant. You can choose to sell everything, transfer the cash, and start over without any tax impacts.

Actual transfer
Open accounts at your new brokerage = one for every account type (e.g. Rollover IRA, Brokerage, Roth IRA). Indicate that the account will be funded later (via transfer); you don’t need to deposit anything at this time. Bogleheads generally recommend Fidelity, Schwab or Vanguard for cost-effective index funds and ETFs.

Before you initiate the transfer, confirm what fees may be reimbursed or charged from your old custodian. Make sure that your new custodian requests any IRA transfer to be a Rollover not a withdrawal, and transfer all assets “in Kind”. Always initiate the transfer from the receiving end! They generally need copies of recent statements to identify the holdings. Cash will be sent to your new Settlement account(s). Transfers may take a week or two to complete.

For IRAs, you may receive a check made out to “NewBroker FSBO yourname”. Forward that to the new custodian. After the transfer, deploy the assets according to your new allocation (see Wiki on tax-efficient asset allocation).