How to Break up with Your Financial Advisor (and Find a New One)

Advanced Financial Planning | Wealth Management

 Plancorp Team By: Plancorp Team

Not every relationship is a "fit," and sometimes they just have to end when people aren't on the same page. Sometimes business partnerships and personal relationships have an end date, and the same might also apply to your financial advisor.

You and your financial advisor might need to part ways for numerous reasons. You might not feel your portfolio is getting the time and attention it needs, or there is a loss of trust. Here are the signs to look for and how to break up with your current advisor to find one that works for you.

Can You Trust Your Current Financial Advisor?

Trust is the most critical asset a financial advisor brings to the table. If phone calls go unreturned, you question the investments your advisor has recommended, or you generally don't feel a sense of a fiduciary relationship, it might be time to end the relationship.

Dealing with your financial future can be stressful, and having doubts about your advisor only adds to the stress. An advisor that lacks clarity and transparency is not building a trust-based relationship. If you don't feel an ongoing effort to build trust or put your needs first, it is time to end things.

Four Signs You Should Break Up with Your Advisor

Several signs indicate it is time to move on from your current advisor. Each is a tell that your best interests aren't being considered.

1. Your Financial Situation has Changed, but the Advice Stayed the Same

Financial conditions can change dramatically over several years, and the last few years have had some big ups and downs. If you've received the same guidance year after year despite economic changes, especially if you're getting close to retirement, there is a disconnect with your advisor, and your needs are not being met.

2. Communication is Lacking

A high level of customer service includes regular communication. If your advisor isn't getting back to you or providing updates on your portfolio, you are being taken for granted.

3. The Only Calls You Get Are to Trade or Sell a Product

The other side of lacking communication is an excess of calls to sell or trade a product. Whether the recommendation is for a specific fund, life insurance policy, or annuity, ask why it is recommended and whether a commission is earned. It is a red flag that the focus might be on earning commissions instead of helping you grow wealth.

4. Fees Are Not Explained to You

Advisors only do their work for a fee and work under numerous payment models. Some charge a management fee based on your total investment, while others receive a commission on the products they sell.

A good advisor will tell you how their fees work and adhere to the fiduciary standard.

Steps to Take Before Leaving Your Advisor

There are several vital steps to take before leaving your current advisor. They aren't difficult but are essential to ensure the transfer goes smoothly.

1. Assess your Current Advisor

At the end of any process, assessing what went right and wrong is always valuable. Knowing what was lacking in the relationship and what might have gone well help you find a better fit and define your expectations.

Some questions to ask yourself would be:

  • Were all my financial planning needs met with the essential components for a financial plan?
  • Did my advisor display the level of knowledge needed?
  • Was there a fiduciary relationship?
  • What have been my returns, and which financial products performed poorly or well?
  • Was there transparency?

2. Evaluate your Advisor Options

When looking for a new advisor, evaluating credentials, the firm, and the payment structure is essential. Never hesitate to ask tough questions and for references.

Some essential things to look for are:

  • Education and experience
  • Certifications
  • Fees and conflicts of interest
  • If they are a fiduciary/standard of care
  • The working relationship

3. Interview a New Advisor

The evaluation of a new advisor needs to include an array of questions to support your assessment. 

The twelve most important questions are:

  1. Are you a fiduciary? Will you put it in writing?
  2. What are my all-in costs?
  3. What qualifications do you have?
  4. Are you a fee-only advisor, or are you paid by earning commissions?
  5. What is your philosophy for investing?
  6. How do you benchmark investments?
  7. What will be my tax liabilities?
  8. Who is your custodian?
  9. What allocation of assets do you use?
  10. How often will we meet or discuss my investments?
  11. Will you review my estate planning documents?
  12. If something happens to you, who will assume responsibility for my account?

Documents from Your Financial Advisor

Breaking up with your advisor means having records of essential documentation and records, and it also includes new documents issued by your new financial advisor.

What to Retain from Your Current Advisor

While your current financial advisor must transfer your records to your new advisor, it's best to have your transaction history on file in case something goes wrong. You should have your complete transaction history in your account on the current firm's website; so be sure to download it and save your complete transaction history from previous financial advisor.

You probably signed a management contract with your current advisor, which includes a clause that spells out how to terminate the relationship. Read through the details and note if a termination fee is required or just have to supply a signed letter. Retain your contract if there is any question about meeting the termination requirements.

Your New Documents

A new advisor will provide you with a contract, which should be reviewed and filed like all contracts. An accompanying letter that spells out the fiduciary duty of your new wealth manager should be supplied.

Ensure that your preliminary plan is on paper, payment terms spelled out, and you have the prospectus for any new financial products.

Now, Let Your Wealth Grow

Ending an unproductive relationship is a chance to move on to what works best for you. Congratulate yourself on moving forward.

We all live and learn, and you've learned what didn't work for you, what you want in your new wealth manager, and how you wish to see your investments continue to grow through to retirement. Asking the right questions and knowing what you want, you've undoubtedly found the financial advisor to help continually improve your financial position.

Would you like more in-depth information about evaluating your current advisor and what to look for in a new financial advisor? Plancorp's free ebooks are excellent guides for anyone contemplating a breakup.

Download them today.

Related Posts

Plancorp started with a unique philosophy: Always put your clients’ interests ahead of your own, and you’ll build a successful business. That was in 1983, but the sentiment still drives every decision we make. After 40 years of helping individuals, families and business owners plan for financial independence, our commitment to serving as financial life advocates is stronger than ever. More »