Is It Time To Fire Your Financial Advisor?
Updated: Mar 28
The following is for educational and entertainment purposes only, and should not be considered financial advice. Please do your own research, and contact a licensed professional for individualized assistance.
Financial professionals are meant to help individuals achieve their financial goals. They offer advice and expertise on everything from estate planning and tax planning to investment strategies and asset allocation. While financial advisors can be invaluable in helping individuals achieve financial independence, not every advisor is a good fit for every client. If you feel that your current advisor is not meeting your needs, it may be time to consider a new financial advisor.
Before we dive into the steps for firing your financial advisor and choosing a new one, let's discuss some of the warning signs that may indicate it's time to look for a new advisor. These warning signs include poor communication, high costs, and a lack of valuable information.
Warning Signs From Your Advisor
For example, if your advisor is not returning your phone calls or emails in a timely manner, this may be a huge red flag. They may not be taking the time to review your account properly, and may not be dedicating as much time as you need to your financial goals.
Likewise, if your advisor is charging you high fees for financial products that do not align with your risk tolerance or investment goals, it may be time to consider a new advisor. This behavior is indicative of an advisor potentially driven by sales, rather than a fiduciary duty to you to do what's in your best interest.
How To Find a New Financial Advisor
Let's say you've determined that your current advisor is a pure salesperson with an allergy to timely emails and a fear of a ringing phone. You've decided it's time to start looking for a new advisor, so it's time to pound the pavement.
Start by asking friends and family members if they can recommend a good advisor. You can also check out online reviews and ratings of advisors in your area. Additionally, you may want to consider working with a certified financial planner, as they are held to a high standard of ethical conduct and are required to act in their clients' best interest (that concept of "fiduciary duty" I mentioned earlier).
Once you have found a potential new advisor, you should schedule an initial consultation to discuss your financial situation and goals. During this consultation, you can ask questions about the advisor's years of experience, investment philosophy, fee structure, and the types of financial products they recommend. It's also a good idea to ask about any transfer fees or termination fees you may face if you decide to switch advisors.
When evaluating a potential new advisor, consider whether their investment strategy aligns with your long-term financial goals. If your primary objective is to save for retirement, for example, you may want to work with an advisor who specializes in retirement planning and has experience with mutual funds or ETFs that can help you build a diversified portfolio. If you are interested in tax planning or estate planning, you may want to work with an advisor or tax professional who has expertise in these areas.
Ultimately, the most important factor when choosing a new financial advisor is finding the right fit. The advisor-advisee relationship is a two-way street, and you should feel comfortable asking your advisor questions and discussing your financial matters openly. If you don't feel like your new advisor is a good fit, it's okay to look for a second option.
Should I Consider a Robo-Advisor?
One option to consider when looking for a new advisor is a robo-advisor. Robo-advisors are online investment management services that use algorithms to create and manage investment portfolios. They can be a good choice for individuals who have a smaller portfolio and don't want to pay the fees associated with a traditional wealth advisor. However, if you have a complex financial situation or need more personalized advice, a robo-advisor may not be the best solution.
Transferring to a New Advisor
If you have decided to switch advisors, the final step is to transfer your accounts and investments to your new advisor or brokerage firm. This process may involve completing transfer requests or filling out paperwork to ensure a smooth transition of your assets. Your new advisor should be able to walk you through this process and answer any questions you may have.In the financial services industry, one of the most common explanations clients give for why they fired their old financial advisor is that they didn't receive good advice. This underscores the importance of financial education and knowing enough about personal finance to recognize good advice when you hear it.
Another important issue to consider when choosing a new financial advisor is their approach to investment management. Some advisors may recommend proprietary funds or hedge funds that are managed by their own investment company or advisory firm. While these funds may offer certain benefits, such as lower fees or better service, it is important to ensure that the advisor is acting in your best interest and not just promoting their own financial products.
When it comes to fees, it's important to understand how much money you will be paying your new advisor and what services are included in the fee structure. Some advisors charge a flat fee for their services, while others charge a percentage of the assets they manage. It's also important to understand any tax advice or estate planning services that may be included in the fee structure. If you have student loans or other debts, it's important to discuss these with your new advisor and ensure that they are taken into account when creating an investment strategy. A good advisor will help you balance your short-term financial needs with your long-term investment goals and create a plan that aligns with your overall financial situation.
Staying Financially Educated
While it's a good idea to seek out professional financial planning advice, it's also important to educate yourself on financial matters and stay informed about your own investments. You can do this by reading financial publications like...well...this one! You can also stay current on your own financial situation by regularly reviewing your investment statements and reports.
In conclusion, firing your financial advisor can be a difficult decision, but it's important to ensure that you are working with the right advisor who can help you achieve your financial goals. When choosing a new advisor, consider factors such as their years of experience, investment strategy, and fee structure. Make sure that the advisor is a good fit for your personal situation and that you feel comfortable discussing your financial matters with them. With the right steps and a little bit of research, you can find a new advisor who will help you make the most important financial decisions of your life.