The Scotia Wealth Management Guide to Deciding When to Switch Financial Advisors

When is a frustration a reason to switch financial advisors?

A frustration justifies switching financial advisors only when it points to a gap in the advice itself: no one has asked for your vesting schedule, nobody has discussed deferred comp payout elections, or no one can say which account pays your withdrawals in the first year without a paycheck.

Executives often believe that one weak year of returns or infrequent calls is reason enough to leave. The better test is whether returns lagged a benchmark that matches the portfolio's actual mix, since a portfolio holding 60 percent stocks shouldn't be judged against a stock index alone, and whether the shortfall comes from the advice. A down market isn't a sign, and neither is a quarterly report you find dull. Markets go down as well as up, and any investment can lose money, principal included, whoever manages it.

Switching gains you someone who works on your stock and deferred pay. It costs you an advisor who knows your history, possible transfer-out fees at the old custodian and a few weeks of re-papering accounts. If your advisor fixes the gaps once you raise them in writing, staying is usually the cheaper choice, and a switch by itself changes no tax and no return.

That's the position Scotia Wealth Management takes on a second opinion. A review can end with 'keep your advisor and fix these two items,' and the parts that work stay exactly as they are.

In your 50s, while awards still vest

Many executives in their 50s assume a switch can wait until retirement is close, since nothing feels urgent. The rule runs the other way: this is the stage where a switch costs least, because accounts move in kind with basis intact and nothing is sold. Pick a date away from the December 31 cutoff for next year's deferral elections and away from an open trading window, so no election or planned sale falls between two advisors. With awards still vesting, the new advisor also has years to plan the stock down gradually.

When retirement is less than a year away

Executives often say the year they retire is a calm time to switch advisors. It's the opposite: this is when the choices that can't be undone get made. Company stock taken in kind as part of a lump-sum distribution qualifies for net unrealized appreciation (NUA) treatment, and once those shares are rolled into an IRA, that option is gone for them. The cutoff is the rollover paperwork, not the retirement party.

Peggy, a 63-year-old widowed senior vice president of sales at a consumer goods company with one grown son, separates in six months, and her current advisor has already drafted a rollover of the full $1.4 million 401(k) (hypothetical, round numbers). Of that, $600,000 is company stock with a $90,000 basis. If she switches advisors now, NUA is still open: the $90,000 basis is ordinary income either way, and the $510,000 gain ($600,000 minus $90,000) can be taxed later at long-term capital gains rates. If she switches two years from now, the shares sit in an IRA and that $510,000 comes out as ordinary income. Assuming, for illustration, a 15-point gap between her two rates, $510,000 × 15 percent = $76,500. Five years from now the loss is the same, and her conversion years before RMDs at 75 have shrunk from 12 to seven.

In cash-flow terms, the old roadmap draws $56,000 annually (4 percent of $1.4 million, about $4,700 monthly), all from the IRA and all taxed as ordinary income. After a switch, part of each year's withdrawals can come from NUA shares sold at long-term capital gains rates. NUA isn't right for everyone; it depends on the stock's basis, your rates and how soon you need the money.

Deferred comp adds a second cutoff. Under section 409A of the tax code, a change to a payout election generally has to be made at least 12 months ahead of the first payment date. The new start date must also be no earlier than five years after the original one. An advisor who raises it in your last month is too late.

Switching advisors after the 401(k) has already been rolled into an IRA is a timing error: Peggy's $510,000 of gain loses NUA, which at the illustrative rate gap costs $76,500 in extra tax over time. If you are within 12 months of leaving your employer and your advisor hasn't discussed the NUA option, your deferred comp payout election and which account pays your first withdrawals, get a second opinion before signing any rollover or election form. If not, a switch can wait a year with no large tax events.

If the rate gap is 10 points instead of 15, the same $510,000 gain costs $51,000 rather than $76,500.

What happens if you switch in the first years without a paycheck?

Switching in the first years without a paycheck matters because IRA withdrawals, capital gains and the NUA basis all count in modified adjusted gross income (MAGI), and Medicare's income-related surcharge, IRMAA, uses MAGI from two years earlier. Income at 63 therefore sets the Part B premium at 65.

Many retirees believe taxes stop mattering once salary stops. For a single filer using the 2026 figures from CMS, MAGI up to $109,000 means a $202.90 monthly Part B premium. Above $109,000 and up to $137,000 it rises to $284.10, an extra $81.20 monthly, or $974.40 annually.

Say a new advisor 'cleans up' the portfolio by selling $60,000 of gains in a year when Peggy's other income is $70,000. MAGI reaches $130,000, and she lands in the higher tier two years later. Spreading the sales across years, or keeping each year under the threshold, avoids that. Tax planning for executives covers how to pace those sales.

Qualified Roth IRA withdrawals don't count in MAGI, and the years between retirement and RMDs are when many retirees convert. Ask whether your current advisor has ever mentioned conversions; silence there tells you something.

After 73 or 75, when RMDs set the pace

Some people assume a new custodian takes over the required minimum distribution (RMD) duty automatically. It doesn't: a mid-year transfer does not cancel that year's RMD, which is based on the prior December 31 balance, and RMDs start at 73 (75 if you were born in 1960 or later). Ask the old custodian whether this year's amount has been taken before you move the IRA. A missed RMD carries a 25 percent IRS excise tax, cut to 10 percent if corrected in time; on a missed $40,000, that's $10,000.

Switching without selling: the order of moves

The order matters more than the speed. Each step below is something you can do yourself, and the first three are a useful shortcut for deciding whether to switch at all.

Three errors recur. Selling before the transfer realizes a $300,000 gain on a $400,000 position with a $100,000 basis. Closing the old account first stalls an in-kind transfer, leaving assets in limbo. Forgetting the year's RMD risks the 25 percent excise tax.

Steps one to three cost nothing. Many readers stop there, because the answers show the current advisor can fix the gaps; if that happens, you've avoided a switch and its costs.

• 1) Pull the last two quarterly statements and a cost-basis report for every taxable account.
• 2) List every cutoff in the next 12 months: separation date, the plan's distribution form, deferral elections.
• 3) Put the questions your advisor skipped in writing and give two weeks for answers.
• 4) If the answers miss, choose the new advisor and open matching accounts (IRA to IRA, joint to joint).
• 5) Start the transfer from the receiving firm, in kind.
• 6) Once the assets land, check that the cost basis came over, and make any sale only after a written estimate of the gain.

When to ask Scotia Wealth Management for a second look, and what to bring

The useful moment comes before any rollover, distribution or deferred comp election form gets signed, ideally a year before separation. Bring your latest statements, the cost-basis report, the plan's distribution election form and your deferred comp election confirmations. With those, Scotia Wealth Management can say which parts of the current roadmap to keep. Clients anywhere in the country can reach us via the request form, and reviews are held online or by phone.