Trying to change financial advisers?

Are you considering looking for financial advice in the new year?

A reader whom I’ll call “Barbara” wants help in finding a new financial adviser.

In her words: “[My husband and I] are looking for a new financial adviser who would monitor and advise us on all the investments we hold. The adviser we currently have is retiring.”

Since finding an adviser is an exercise in matching your needs with the expertise of the adviser, don’t think that you can find an appropriate adviser by doing an internet search or by choosing a friend’s adviser.

Begin with a self-assessment. In this case, Barbara’s background would exclude most of the hundreds of thousands of advisers who could be quite appropriate for someone in a different position.

Here are the clues about Barbara’s situation:

“My husband and I are both retired for about 20 years, and we are looking for someone who would help to manage our current portfolio. We have had a financial adviser for about 20 years for some of our investments. Others, like our variable annuity and an inherited investment, we ‘handled’ ourselves. The companies holding these investments did all the investing.”

First, Barbara needs help to “manage” her portfolio. That’s a key differentiator among investment advisers.

To give you context, I’ll share my perspective as someone who started her Wall Street career as a lawyer, and as the author of “The Discerning Investor,” an American Bar Association publication for lawyers. Portfolio management is the work of registered investment advisers, as opposed to broker-dealers.

What’s the difference between the two regulatory environments, and why does it matter?

As former U.S. Securities and Exchange Commission Chairman Jay Clayton explained: “It really comes down to what you are looking for . ... Do you want someone managing your account on an ongoing basis based on your broad financial goals and needs and movements in the markets? If so, an investment adviser may be best for you. Or, do you plan to buy a few stocks, bonds, mutual funds or ETFs and hold them for the long term with a few adjustments over the years? In that case, a broker[-dealer] may be best for you” (tinyurl.com/mvsn8rdh).

The regulatory differences will guide Barbara to a registered investment adviser.

Second, the size of the portfolio will limit Barbara’s choices and the path she would take to actually find the right investment adviser to work with.

The high-net-worth ($5 million-plus) and ultrahigh-net-worth ($20 million-plus) may wish to work with firms that limit their client relationships to clientele similarly situated. Why? Higher-net-worth families have more complex financial and legal needs. They will benefit from working with a firm that is expert at dealing with their tax and wealth-related concerns.

No matter the size of the portfolio, the best place to start for some names of potential firms or advisers to interview is your accountant or lawyer. Why? They know you, have other clients like you, and you can expect (but always confirm) that they have done their due diligence before making a referral. (Make sure to confirm that they are not receiving a referral fee for the recommendation, which would pose a conflict of interest.)

Accountants and attorneys (and you) have access to sophisticated due-diligence tools online, which help zero in on conflicts of interest, the most important element of a due-diligence review. Form CRS is the essential starting point. It’s a short, easily understood SEC disclosure document that will help compare and contrast firms. (If you would like more information on Form CRS, write to me at readers@juliejason.com.)

What’s the bottom line for Barbara?

Given that she needs portfolio management and retirement expertise, she will want to confirm that the adviser is offering both. But, before jumping into interviews, I would highly recommend that Barbara do her own due diligence, starting with reading Form CRSs for prospective investment advisers.

These are the starting steps. If you want help with interview questions, let me know. And, if you want to offer some questions to add to my list, send them to me. If you are a financial adviser, let me know the best questions you’ve been asked — and how about some of the worst?

Seasoned Investment Counsel and award-winning columnist and author, Julie Jason, JD, LLM, promotes financial literacy and investor protection. Read her latest book, “The Discerning Investor: Personal Portfolio Management in Retirement for Lawyers (and Their Clients),” published by the American Bar Association. Write to Julie at readers@juliejason.com. While all questions cannot be answered, each email is read and reviewed and can lead to discussion in a future column.