When it comes to your financial advisor, breaking up can be hard to do.
Changing financial advisors can feel almost like splitting up from a romantic relationship, according to Patricia Jennerjohn, a certified financial planner at Focused Finances in Oakland, California. The intimacy of financial knowledge can run deeper than the bonds of marriage. Celia Brugge, a certified financial planner at Dogwood Financial Planning in Memphis, Tennessee, adds, “I’ve had people tell me things they haven’t told their spouse. One client was diagnosed with cancer, and I was the first person they confided in because their immediate concern was, ‘how will I pay for treatment, and how will that impact my family?'”
While evaluating the performance of your retirement savings is an obvious way to judge your financial advisor, relationships often end for more emotional reasons. Here are some signs it’s time to reevaluate your financial advisor relationship:
1. You’re Reluctant to Contact Your Financial Advisor
If you’re hesitating to pick up the phone and ask financial questions, it’s a red flag. “If you’re not reaching out because you believe your concerns aren’t important or because you feel like you’re bothering them, those are significant warning signs,” says Jennerjohn.
Ask yourself why you’re afraid to call. If your previous calls weren’t promptly returned, or if the conversations felt rushed, it might be time to assess the viability of this relationship. “Some clients may feel insignificant compared to their advisor’s wealthier clients, but your financial matters deserve full attention,” Jennerjohn adds.
2. Your Financial Advisor Doesn’t Listen to You
Jennerjohn has a client who is hesitating to leave her current financial advisor because he dismisses her requests and suggestions. “It’s like, ‘don’t question the doctor, just take the prescription,'” she says. Some clients can be overwhelmed by a fancy suit and office, as well as a barrage of complex advice that goes over their heads. “They feel intimidated to stay with this person,” Jennerjohn notes.
3. Your Financial Situation Is Changing, But the Advice Isn’t
If your financial advisor isn’t adjusting your financial plan when major life events are on the horizon, such as retirement, it’s a problem. Some advisors get stuck in an “accumulation phase” mindset, rather than preparing for the time when your investment savings need to replace a steady paycheck.
“How do you decide what to withdraw when, and in what order should you use your different accounts? These become crucial questions as retirement approaches,” says Brugge.
4. Your Financial Advisor Only Calls to Execute Trades
Another warning sign is if your financial advisor only contacts you when they want to buy or sell assets in your portfolio. This may indicate that your advisor is more interested in the fees they can earn through trading on your account.
Understanding how your current or potential advisor earns money is vital. Some make money through commissions on products they sell, while others charge clients a percentage of the assets they manage (typically around 1%). Many clients prefer fee-only advisors who charge an hourly rate or a flat fee for services and don’t have a financial incentive to push specific products.
If you suspect your advisor is only focused on making a quick profit at your expense, it may be time to consider other options.
5. Your Eye Is Wandering
If you find yourself seeking other financial advice or scrutinizing your advisor’s contract, you’re probably ready to move on.
Emotionally, parting ways with a financial advisor can be challenging, but legally, it’s usually straightforward. You can sign an agreement with your new firm and notify your old advisor. However, there might be financial implications. Review your old advisor’s contract to check for termination fees or additional costs. Additionally, moving assets from funds directly managed by your old advisor’s company could have tax consequences.
Regardless, if you’re no longer satisfied with your current advisor relationship, remember that you have the option to explore better-suited alternatives. As Brugge says, “A financial advisor relationship goes beyond mere numbers; it can be remarkably close. It’s a significant responsibility, and our clients deserve our best.”