When a long-time advisor retires, the firm assigns you someone new and most clients simply stay. That may well be the right outcome. But this is the one moment when asking hard questions costs you nothing, and the plan you hold was built for an earlier stage of your life. Here are the seven things worth checking first.
The person who knew your history, your family and the reason behind each decision has left. The firm, the portfolio and the fees usually stay exactly as they were.
Your right to ask. A new advisor expects questions from a client they inherited. Nothing below requires you to move a dollar.
Ask who makes the decisions on your account, how many households that person looks after, and how often you will hear from them. Watch for: being moved from a senior advisor to a service team without being told.
A plan written while you were working was aimed at growth. In retirement the questions are different: how much you draw each year, for how long, and what a bad first five years would do to it. Watch for: an allocation that has not changed since before you retired.
Add the advisory fee, the expenses inside each fund and any platform or trading costs. A 1% advisory fee on $5 million is $50,000 a year, before fund expenses. Watch for: costs you can only find as percentages spread across several documents.
A portfolio built over twenty years collects funds that hold the same stocks, and positions nobody remembers the reason for. Ask for the job of each holding in one sentence. Watch for: several funds with the same largest holdings.
List what pays you: dividends, interest, and sales of holdings. Then ask what would have happened to that income in 2008 and in 2022. Watch for: an income that depends on selling shares every year, whatever the price.
Ask for the unrealised gain on each position. Changing advisors does not by itself create a tax bill, because accounts usually move as they are. The bill comes if holdings are then sold, so ask any new advisor how they would handle the positions with large gains. Watch for: a proposal that starts by selling everything.
If something happens to you, your spouse or heirs need one person who knows the accounts, the plan and where the documents are. Watch for: a spouse who has never met the advisor.
If you decide to move. Accounts normally transfer between firms with the holdings intact, so moving is not selling. The new firm starts the transfer and it usually completes in about a week. Two things to ask first: whether your current firm charges an account closing or transfer fee, and whether you hold any funds that only your current firm can hold, because those may have to be sold.
This guide is the checklist. The review works through it with your own statements: what you own and why, your total cost in dollars, how your income would have held in past downturns, and the tax position of each holding.
It does not produce a sales pitch. It gives you the numbers to decide for yourself whether to stay or to change. Fifteen minutes to start, no cost, no obligation.
Glenn Caldicott, Chief Investment Officer, Empirical Asset Management
For information and education only. Not investment, tax, or legal advice. Transfer times, fees and tax treatment vary by firm, account type and jurisdiction. Consult a qualified tax adviser, estate attorney and financial planner before acting. Trefis is a research provider only and does not, nor is it licensed to, provide investment advisory services. Trefis is not subject to any state or federal investment regulations and provides information for educational purposes only. Any implementation of Trefis strategies will be done by unaffiliated third party investment advisory firms with proper registration and pursuant to a separate agreement. Trefis does not receive compensation related to introductions made to third party investment advisory firms. Implementations of Trefis strategies executed by third party investment advisory firms may vary from information contained on this website. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.