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While the performance of your investments over time is an obvious metric by which to judge your financial advisor, there are a few other factors you may want to consider when deciding if your relationship has long-term potential.
Here are some signals you may not want to ignore — and a quick guide on how to switch advisors if you decide to do so. Advertisement.
Have you ever stayed in a relationship that wasn’t working just to avoid an awkward breakup conversation? Many of us have done the same thing with our financial advisors.
I’ve talked with countless people who knew deep down their advisor wasn’t serving them well, but they kept paying those fees month after month. Why? Because money conversations are uncomfortable, and ending professional relationships feels awkward.
As Dennis Nolte, a certified financial planner puts it “Every advisor’s been canned by somebody.” It’s a normal part of the financial world yet we treat it like some terrible betrayal.
Today, I want to help you figure out when to take a break and how to do it without making a big deal out of it. You should take care of YOUR money and future, after all.
8 Warning Signs It’s Time to Break Up With Your Financial Advisor
1. Poor Performance Over Extended Periods
Let’s be real – markets go up and down A bad year doesn’t necessarily mean your advisor is failing you But if you’ve seen consistently poor performance over several years compared to market benchmarks, that’s a legitimate concern.
In Suze Orman’s column, she talks about a client who lost $20,000 of their initial $80,000 investment over NINE YEARS while working with an advisor. That advisor kept telling the client that “the market hasn’t been good” and that they would have to make a “long-term commitment before seeing any gains.” “.
Excuse me? Nine years IS long-term! If your advisor keeps making excuses rather than results, it’s time to reconsider the relationship.
2. Communication Breakdown
Do you feel like your advisor never returns your calls? Or when they do, they speak in confusing jargon that leaves you more confused than before?
Your advisor should help you understand complicated financial ideas and listen to your concerns. It’s a red flag if they’re never available or if they make you feel stupid for asking questions.
3. Your Financial Goals Have Changed
Maybe you started with an advisor when you were focusing on aggressive growth, but now you’re nearing retirement and need income strategies. If your advisor isn’t adapting their approach to your changing life circumstances, it might be time to find someone who specializes in your current needs.
4. Fee Structure Concerns
Are you clear on exactly how your advisor gets paid? If they operate solely on commission, there could be a conflict of interest, as Suze Orman points out. They might be incentivized to buy and sell frequently in your account whether it benefits you or not.
Consider advisors who charge an hourly rate, a fixed annual fee, or a percentage of your assets (around 1%). And if you discover hidden fees or costs that weren’t disclosed upfront, that’s definitely a reason to walk away.
5. They Don’t Listen to You
Have they ignored your worries or pushed products that don’t fit with your goals? If you’ve told them you don’t like certain investment strategies but they keep pushing them, they’re not looking out for your best interests.
6. Your Gut Says Something’s Wrong
As Suze Orman wisely notes, “If you feel in your gut that this relationship isn’t working, listen to yourself.” Sometimes our intuition picks up on red flags before we can articulate exactly what’s wrong. Don’t ignore that feeling.
7. They Focus More on Side Projects Than Your Portfolio
The client in Oprah’s magazine suspected their advisor “spends his time on side projects instead of making money for me.” If your advisor seems distracted, uninterested, or is clearly spreading themselves too thin across multiple businesses, your portfolio may not be getting the attention it deserves.
8. Philosophical Differences
You might have fundamentally different approaches to money and investing. Some advisors are extremely conservative, others are aggressive risk-takers. If your advisor’s philosophy doesn’t match yours and they’re unwilling to adapt, that mismatch will cause ongoing friction.
How to Break Up With Your Financial Advisor
Once you’ve decided it’s time to part ways, here’s how to handle it professionally:
1. Check Your Contract First
Before having the breakup conversation, review the letter of engagement or contract you signed when you started working with your advisor. Jamie Ebersole, a certified financial planner, recommends verifying whether there are specific steps required to end the relationship, such as giving 30 days notice or sending a formal letter of disengagement.
2. Consider Your Next Steps
Will you be moving to another advisor or managing your money yourself? As Ebersole suggests, “Sit down and figure out what didn’t work and what you’re looking for in a new firm. Let’s make sure that there’s somebody out there that does what you want.”
If you’re switching to another advisor, it often makes sense to have the new one lined up before ending your current relationship. They can help facilitate the transfer of assets.
3. Have the Conversation
You don’t need a dramatic in-person meeting. A short email or phone call is perfectly acceptable. As Nolte suggests, “Any sort of ending of a relationship is well served by a recitation of ‘It’s not you, it’s me.'”
Keeping things amicable is important since you may need future communication about tax documents or asset transfers.
4. Transfer Your Assets
Work with your new advisor (or do it yourself) to transfer your investments. Your former advisor should help with this transition. As Nolte points out, “They’re not going to stonewall. If they do, that’s highly unprofessional.”
Be aware there may be small termination fees associated with moving your money.
5. Secure Important Documents
Make sure you have access to all important financial documents and statements, especially information about the cost basis of taxable investments. Most forms should be available online or you should have hard copies.
Should You Manage Your Own Money Instead?
Suze Orman makes a provocative point: “If you want to find the best financial planner in the world, look in the mirror.”
While not everyone has the time, knowledge, or inclination to manage their own investments, it’s worth considering whether you need an advisor at all. With today’s robo-advisors and low-cost index funds, many people can successfully handle their investments without paying for professional management.
However, Orman does acknowledge that advisors can be helpful if your investments surpass $50,000 (though some won’t take clients with less than $250,000).
The Bottom Line
Remember this: No one will ever care about your money as much as you do. Fear of hurting someone’s feelings shouldn’t keep you tied to an advisor who isn’t serving your needs.
As Jon Luskin, a fee-only certified financial planner says, “Certainly don’t let the awkward conversation stop you from doing what you need to do.” It’s your money, your future, and ultimately your decision.
Breaking up with your financial advisor isn’t a failure – it’s an act of taking control of your financial future. And sometimes, that’s exactly what you need to do to achieve your financial goals.
Have you ever broken up with a financial advisor? What was your experience like? Drop a comment below – I’d love to hear your stories!
Disclaimer: This article contains general information and should not be considered financial advice. Always consult with qualified professionals before making significant financial decisions.
Your financial advisor doesn’t listen to you
Jennerjohn has a client who is seeing another financial advisor and Jennerjohn. The client can’t bring herself to break up with it. “My client says, ‘I make requests and suggestions, but he just brushes me off,’” she says.
A fancy suit, office, and a lot of advice that sounds good but doesn’t make sense to clients can daunt them. “It’s kind of like, ‘don’t question the doctor, just take the prescription,’” Jennerjohn says. “They feel intimidated to stay with this person. ”.
» What should you expect? Learn more about what financial advisors do.
How to switch financial advisors
Emotionally, breaking up with a financial advisor or financial consultant may be hard to do. But logistically, switching financial advisors can be pretty straightforward — if you know what to look out for.
When Should I Hire a Financial Advisor?
FAQ
When should you stop using a financial advisor?
The decision to cut ties with your financial advisor should be based on the performance of their services, not just on your portfolio’s performance. You might want to switch advisors if you think that the one you have now isn’t giving you the best advice or direction for your financial goals.
What is the 80/20 rule for financial advisors?
Better investment choices: According to the Pareto Investment Principle, 80% of investment returns can be expected from 20% of investments. Focusing your investment choices on the investments that are most likely to give you the best returns may help you save more money faster.
What is a red flag for a financial advisor?
Your financial advisor should help you make smart choices, but there are ways to tell if they aren’t (bad financial advisor warning signs). These signs generally include pushing unsuitable products, lacking transparency about fees, or being unresponsive to your questions or concerns.
How long does the average client stay with a financial advisor?
For instance – did you know that according to a study1 from Etrade Advisor Sales in 2019 – the average percentage of clients that leave during a given year is 20% within a year. And 25% within one-two years. Or – put another way – roughly one-fourth of new clients may leave within the first two years.
Should you let your financial advisor know you’re leaving?
Don’t feel guilty about prioritizing your financial needs. Advisors are used to clients leaving, so don’t overthink it. It’s a business decision, not a personal rejection. While you’re not required to, letting your advisor know you’re leaving is a classy move. A quick call or email does the trick.
What happens if you leave a financial adviser?
Have a new adviser picked out When you leave your old financial adviser, they’ll have to transfer your financial records to your new one. So before you pull the plug on any relationships, make sure you’ve got a new adviser all set up. We think Paladin Registry, an advior registry that can match you with an adviser is a great place to start.
When should I bring in a new financial advisor?
After you’ve left the advisor, take time to reevaluate your finances and determine if any changes need to be made. This would be an opportune time to bring in a new financial advisor to analyze your financial plan and make appropriate recommendations. Moreover, your new financial representative can help with the transfer of your accounts. 5.
What should I do if my advisor wants to leave?
It’s no different in an advisor-client relationship. 2. Notify them (on your terms) While you don’t have to inform your advisor of your intention to leave technically, it’s a courteous gesture. Reach out in any way you feel comfortable.
Do I need a financial advisor?
Best bet is the financial advisor got them started. He is looking to leave the advisor. His question was not about his advisor. Yeah no offense homie, but unless you’ve got some serious investments or are in your 50s and need to protect them for retirement, there is no need for an advisor. Is it a managed account? Or a non-managed brokerage?
What if I don’t want to work with a financial advisor?
The new advisor can assist in transferring your assets and starting a new financial plan as seamlessly as possible. If you don’t want to continue working with a financial advisor, that’s fine too. You’ll just handle the process on your own. When you onboarded with your current advisor, you signed a contract or letter of engagement.