When it comes to your financial advisor, breaking up can be hard to do.
Changing financial advisors can feel “almost the same as splitting up” a romance, says Patricia Jennerjohn, a certified financial planner with Focused Finances in Oakland, California, as the intimacy of financial knowledge can be deeper than the bonds of marriage.
“I’ve had people tell me things they haven’t told their wife or husband,” adds Celia Brugge, a certified financial planner with Dogwood Financial Planning in Memphis, Tennessee. “One client was diagnosed with cancer, and I was the first person they told because the first thing on his mind was, ‘how will I pay for treatment, and how will that impact my family?’”
While performance of your retirement savings over time is an obvious metric by which to judge your financial advisor, the relationship often ends for more emotional reasons, experts say. Here are some signs it’s time to cross your financial advisor off your Valentine’s Day card list.
1. You’re afraid to call your financial advisor
If you’re having trouble picking up the phone to ask a financial question, that’s a bad sign. “If you’re not calling because you don’t think your concerns are important, or you feel like, ‘they’re too busy — I don’t want to bother them,’ those are big red flags,” Jennerjohn says.
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 potatoes compared to their advisor’s other [wealthier] clients … but you shouldn’t feel that’s a problem,” Jennerjohn adds. “This is all the money you have in the world, and that deserves full attention.”
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2. Your financial advisor doesn’t listen to you
Jennerjohn has a client who is two-timing with her because she can’t work up the courage to break with her other financial advisor. “My client says, ‘I make requests and suggestions, but he just brushes me off,’” she says.
It’s kind of like, ‘don’t question the doctor, just take the prescription.’ They feel intimidated to stay with this person.
Often, clients can be overawed by a fancy suit and office, and a barrage of smart-sounding advice that goes right over their heads. “It’s kind of like, ‘don’t question the doctor, just take the prescription’,” Jennerjohn says. “They feel intimidated to stay with this person.”
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3. Your financial situation is changing, but the advice isn’t
Similar to not hearing you is not changing financial tack when a major life event is on the horizon, such as retirement. Some advisors get stuck in “accumulation phase,” Brugge says, rather than preparing for the time when your investment savings replace a steady paycheck.
“You’ve been saving all this money, but it’s in different pots of money — some may be in taxable accounts, maybe you’re remarried and you’ve got his-and-her money,” Brugge says. “How do you decide what to take out, when, and in what order should the accounts be used? Those become the big questions now.”
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4. Your financial advisor only calls to trade
Another red flag: You only hear from your advisor when they want to execute a buy or sell order on your portfolio. That may be a sign your advisor is only interested in the fees they may pocket by trading on your account, Jennerjohn says.
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.
If you feel your advisor is only looking to make a quick buck off you, it may be time to say so long.
5. Your eye is already wandering
If you find yourself listening to other financial advice, or looking at your advisor contract with a critical eye, you’re probably 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.
» Considering a new advisor? 10 questions to ask
“A financial advisor relationship inevitably gets into more than numbers … it can be incredibly close,” Brugge says. “It’s an awesome responsibility, and our clients deserve our best.”