So you’ve been working with a financial professional for a while, but things just don’t “feel right” anymore. Maybe the advisor is inattentive, or maybe you’re just not seeing the results you’d hoped for. How do you know when it’s okay to overlook some minor issues, and when it’s time to leave? Here are 9 reasons why you should consider firing your financial advisor:
Quick but important note: you will see that “my investments are down” is not on this list of reasons to go elsewhere, though it’s one of the most common reasons clients seek out new advisors. Investment markets will fluctuate – there is no getting around it. Just because your portfolio, hopefully crafted to meet your long-term investing needs, is down is not a sign that your advisor is doing anything wrong.
If they act like less of a planner and more like a pitch maker.
You know the type: big smile, really expensive pen, armed with glossy pie charts and the new account application still warm from the printer. Being good at selling something is nowhere near the same as being a good client advocate and “coach”. True financial planners and advisors will actually take the time to listen to you so that they develop a very clear understanding of your situation and goals. Then and only then, will they provide advice and guidance that fits your specific needs. Beware of anyone who already has a solution in mind without carefully and fully understanding your situation.
If you never hear from them.
In my experience, a financial advisor has to walk a delicate tightrope between contacting his or her clients regularly, but not too regularly. And many times, that’s entirely at the whim of the client. So your advisor may not be perfect in this regard, but there’s a difference between a busy advisor and a lazy one.
A good financial pro will stay in contact on a regular basis (even if it’s only every 6 months or so), to check up on you and make sure your financial situation has not changed significantly.
It is not often that market volatility will force me to make corrections to a client’s financial strategy, but unexpected life events can cause us to make serious changes in a plan or investment portfolio. For that reason, it’s vital that we stay in regular if not frequent contact.
If they work on commission.
Here’s where we differ greatly from much of the financial services industry. We HATE commissions. Commissions are the antithesis of “serving the client’s best interests”, because the client, whether it’s disclosed in a transparent way or not, always gets stuck with the bill. It’s also just common sense that a company or product that must offer a very high commission payout must either be making a mint on every sale, or else is something the customer isn’t going to see much inherent value in (and will need a “nudge” by salesperson). The whole thing just reeks of conflicted priorities and questionable agendas. (And you might guess, nVest Advisors does not work on commission.)
It’s not that there aren’t many wonderfully ethical and talented advisors and planners who earn commission on financial products they may use in your plan, but the products themselves can be ridiculously costly, come with hidden fees and charges all over the place, and can create potent conflicts of interest between the advisor and the client. Advisors who earn commission are compensated to MOVE money between products, regardless of how they perform, so they tend to move money around often to generate commissions. I’ve seen many instances of an advisor selling expensive A-share mutual funds to a client, just to wait 2-3 years and do it again. (I even was expressly “coached” to do that by a mentor early in my career.)
Fee-based compensation means the advisor is paid either a flat fee for the advice, or a fee based on the account value, in which case, the advisor is paid to GROW your money, not MOVE it. That puts a fee-compensated advisor on the same team as the client: we both are money motivated to grow your account.
If despite good intentions, they seem to always fail to do what they say they will do.
This one is simple enough. You are the customer, paying this person based on the claims and promises they make. And yes, even I get behind in returning calls, or have an unexpected event disrupt my calendar. But we’re not talking about the occasional slip-up. Advisors who miss meetings, or pledge something will be done and then never does, aren’t respecting you as a client. If you have to overlook too many instances of the planner being “just human”, it’s time for a change.
If you don’t understand your plan and their explanations only make things worse.
It’s easy for us on the inside of the financial industry to forget that we don’t speak English when we’re discussing Sharpe Ratios, Beta, and Standard Deviation. I’ve always made it a mantra to use analogies and stories to get my point across, and I give my clients permission to stop me at any time and ask me to explain something again. I’m also pretty trained to notice when I’ve lost them (that glazed, deer-in-the-headlights stare), or when it’s becoming overwhelming for them (which happens quite often – this is just not a universe most clients spend a lot of time in). When that happens, we downshift and I break out the notepad and make horrific stick figure drawings of the concept we’re discussing.
My point is, every advisor knows a lot of financial info, but a limited few are good at translating that into plain English for our clients. You shouldn’t have to walk out of his or her office more confused than you went in.
If your instincts are telling you something isn’t right.
This is a no-brainer but it’s often discounted. Ask yourself if you’d trust this person alone with your child or grandchild for a weekend. If you wouldn’t, then why are you trusting him or her with your financial future? Even if the advisor is a totally honest and ethical person, if you find yourself not wanting to be totally open with him or her, it’s best to move on.
Even advisors need do this with clients and prospective clients. We’re responsible for making sure we know the source of your money, are comfortable you are who you claim to be, and need to be reasonably sure we can meet your needs and expectations early on. Otherwise, why start the process in the first place?
Let me give an example: I once had to turn a prospective client away at our first meeting because they did not want to share with me enough information about their other investments to allow me to do my job. They had an old IRA that they kept pressing me to, “show us what you can do with this.”
I told them there were many things we could do, but before I could answer, it was important to know how they were invested elsewhere (to avoid over-concentrating them in something they already owned a lot of, for example). Back and forth we went. I asked for info on how the other accounts were allocated. They said they only wanted to talk about the account they brought to me to look at. Finally, I just pushed their statement back across the table and said I didn’t think the relationship would work. They left, astonished that they had actually just been turned down by the advisor, and even called me two days later to ask again why I had rejected their business, and we finally had the open discussion I had been needing all along.
The bottom line is, our gut is amazingly accurate. If something doesn’t feel right, the odds are, it’s not.
If you simply no longer enjoy the relationship.
The client / advisor connection can become a very strong one, forged over many years of working together toward your goals. Very few people in your life will know you in such intimate detail as your financial planner. You ought to look forward to their calls when you see the advisor’s name on your caller ID. You ought to find them informative, personable, and even likable. If you don’t, change.
If you inherit money, don’t automatically inherit the advisor.
Speaking as an advisor who has had clients pass away, this is a tough one. I know I’d like to believe I served your loved one well, and could do so for you, the fact is, you are you and you need to work with an advisor who meets all of the above criteria, plus any extra that you feel are critical.
Your grandfather’s advisor knew your grandfather, not you. Your needs will be very different, and you need someone who knows and works for YOU.
The advisor steps down or retires.
In this business, the old phrase, “like father, like son” isn’t always the best mantra to follow. The same with the new advisor who got assigned to your account after your first advisor left. Just working for the same firm does not mean they are going to think, invest, or behave the same way.
Your relationship is with your financial pro, not the company they work for. There is no need to stay with the FIRM if your advisor leaves. In fact, you might even consider staying with your advisor if they served your needs well. Just ask the questions about new account fees, costs of reinvestment, and any costs the previous firm will charge you to move your accounts.
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