When it comes to your long-term financial advisor, breaking away from them can be very difficult.
While the performance of your retirement savings over time is an obvious way to judge the success of your financial advisor, the relationship quite often ends for more emotional reasons, experts say. Here are 5 signs it’s time to cross your financial advisor off your Valentine’s Day card list.
Your Financial Situation Has Changed, But The Advice Hasn’t
Similar to not hearing you is not changing financial tack when a major life event is on the horizon, such as your retirement. Many advisors get stuck in the “accumulation phase”, rather than preparing for the time when your investment savings replace a steady wage.
You’ve been saving this money, but it’s in various pots – some may be in taxable accounts, maybe you’ve remarried and you’ve got his-and-her money.
You’re Scared To Call Your Financial Advisor
If you’re having issues with picking up the phone to ask a financial question, that’s a bad sign. If you’re not calling because you don’t believe your concerns are important enough, or you feel like they’re too busy and don’t want to bother them, those are big red flags.
You should ask yourself, why are you afraid to call? If past calls weren’t promptly returned, or the conversation felt rushed once you connected, then it may be time to examine whether this is working out. Some may feel like they are small fish compared to their advisor’s other clients, but you shouldn’t feel that’s a problem.
Your Financial Advisor Only Calls To Trade
Another red flag is that you only hear from your advisor when they want to execute a buy or sell order within your investments. That may be a sign your advisor is only interested in the fees they will pocket by trading on your account.
It’s important to understand how your current or future advisor makes money. Some make money by receiving a commission on products they sell; others charge clients a percentage of the assets they manage (typically around 1%). Many clients prefer a fee-only advisor, who charges an hourly rate or a flat fee for services, and isn’t inclined to steer you toward a fund they get additional cash to sell.
Your Financial Advisor Just Doesn’t Listen To You
A colleague of mine, who is a financial adviser in Leeds, has a new client who is two-timing with her with her old financial advisor because she isn’t brave enough to break with them. Her client says that she makes requests and suggestions, but her old advisor just brushes her off.
The stance of the previous advisor is pretty much “I’m the professional, just take my advice and don’t question it. As a result, the client feels incredibly intimidated to stay with the previous advisor.
Your Eye Has Already Wandered
If you find yourself listening to other financial advice, or looking at your advisor’s contract with a critical eye, you’re very likely ready to make a break.
Emotionally, breaking up with a financial advisor may be hard to do. Legally, switching financial advisors is pretty straightforward: Sign an agreement with your new firm, and notify your old advisor. However, there may be some financial ramifications. Check your old advisor’s contract to see if there is a termination fee, which you’ll need to pay. There also may be additional costs or tax ramifications if you are moving assets from funds managed directly by your old advisor’s company.
Regardless, if you’re not feeling fulfilled in your current advisor relationship, remember: You can always leave.