When to Change Your Financial Advisor: Different Things to Consider
One’s relationship with their financial advisor or financial planner can be a very intimate one, considering how important an individual’s or family’s finances are. This financial professional must be trusted, expectations must be clear, and transparency must be present when dealing with the assets or monetary funds of an individual or family. This means one must make sure that both parties are on the same page on how the finances should be managed and what financial goals one wants to accomplish. When these expectations and needs are not met, or if one does not feel heard in the relationship, a change may be in order for a new financial advisor or financial planner. This can be challenging, especially if one has been using the financial services of a financial professional for a long time. However, no matter how long one’s relationship was with the financial professional, things may change, and moving on may be the best option when corrective behaviors are not met.
The following are four signs that one may need the services of a new financial advisor or financial planner.
1. Poor Communication
Poor communication and a lack of transparency is often the top reason that individuals and families leave their long-term financial advisor or financial planner for a new professional. If one feels as though they are being disregarded or ignored by their financial professional, one may start to consider what the true benefits this service provider is actually providing and if the quality of those financial services are worth the payment fees they charge. If a financial professional is not returning calls or emails in an appropriate amount of time, then it may be best to reconsider the quality of services one is receiving and begin to look for alternative options to one’s financial management.
Financial advisors and financial planners do often have a lot of clients they need to tend to and provide quality work for; however, even still, a financial professional should respond in a timely manner. All questions should be answered by the financial professional, and updates or clarifications should be provided at the request of the client. Whether it is a quick virtual call, in-person office visit, or quarterly reports, regular communication can help an advisor stay up to date on the needs of an individual or family and any significant milestones that may impact one’s financial goals in a positive and negative manner. A financial plan created and put together years ago may no longer be relevant or a service to the client. Major financial setbacks, such as the inevitable ups and downs of the market or getting married and starting a family, can severely impact the financial plan and outcome for an individual or family, so a financial update and check-in is worth exploring. If a financial advisor or financial professional is not open or transparent during those times of need, like in the face of a recession or economic uncertainty, then it may be time to switch financial services providers or find an entirely new firm or family office to work with. Financial advisors or financial planners often reach out to provide reassurances or proactively adjust investment strategies for their clients when the market is unstable. If a financial professional does not provide that level of service, one should evaluate their options further.
Communication should also go both ways; neither party should be the one always reaching out. A proactive financial advisor or financial planner will reach out regularly; however, it is also up to the individual or family to contact their financial professional with any additional news that can change the outlook of one’s financial plan, either positively or negatively.
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2. Uncomfortable Feelings
If a financial service professional makes an individual uncomfortable, then that is the first sign to immediately look for another financial advisor or financial planner. No financial advisor or financial planner should cause feelings of dread when calling them, avoiding visiting them at their physical location, or refusing to share certain financial information with them. In fact, financial professionals should have the opposite effect on the individual, one of calming and reassuring nature rather than one of dread and apprehension. One should be able to call or visit their financial advisor or financial planner to talk about confidential and sensitive financial information and should be able to confide in the individual within a safe space. If one feels more confused or alarmed than reassured after a session, then it may be best to consider why those feelings are in place and to see if anything can be done about them. If the best course of action is to find a new financial professional that understands their clients better and is more empathetic to their situation, then that may be the best option. A good financial advisor or financial planner should be able to listen to one’s financial situation without judgment, provide comfort and reassurance when need be, and be able to clearly explain their recommendations in a way that their client can understand without making a client feel as though they are unintelligent.
While one does not have to be best friends with their financial advisor or financial planner, one should still be on comfortable talking terms and have a solid connection and rapport. With the level of sensitivity and confidentiality, a topic such as finances may have, one must be able to trust and build that connection with a trusted financial professional. Finances can often be an uncomfortable subject to openly discuss with an individual; however, financial advisors and financial planners are trained to have these conversations every day and should make an individual or family comfortable when discussing their finances and financial situation.
3. Lack of Personalized Advice
Financial planning and advisement is often dynamic and is fluid to the individual changes and needs of the individual client or family. Every client’s financial plan is different as it adheres to the different financial situations individuals face every day. This means that a financial advisor or financial planner must be able to keep up with the changing needs of an individual or family and tailor their financial services, financial plans, and investment strategies accordingly.
Not all financial advisors or financial planners are created equally, often coming from various experiences and different specializations. If one needs more specialized or more sophisticated advice about a certain aspect of their finances, then it may be best to consider a new financial professional that is more knowledgeable in that area of finance.
4. High Fees for the Quality of Work Provided
Financial advisors and financial planners often make money by charging fees on the assets under management or the assets that the financial professional manages for the client. Figuring out if the value that one is getting from their financial professional is worth the fee they are paying is essential. This can help an individual or family determine if they are overpaying for the services they can get with a different financial professional for a discounted price.
Fee structures for financial professionals may vary depending on the type of financial service they provide. Some financial advisors or financial planners work for a commission, charge an hourly rate, or charge a flat percentage fee rate. Generally speaking, the fee for a financial advisor or financial planner is typically set between 1-2% of the assets under management per year. For hourly rates, that number can typically run between $120 to $300 depending on the professional, the complexity of their services, and the location of the financial service provider.
It may be the case that the fee an individual or family initially agreed on paying made sense for the financial services that a financial advisor or financial planner agreed on providing, but over time the quality or need for those services have now changed, or the client’s financial situation has changed for the better or worse to where they do not need that same quality of service or intensive financial care, any longer. In this case, it may also be best to consider looking for another financial professional that can provide a different quality or category of services for a different price point.
How to Change Financial Advisors
Understand changing costs
Before changing financial advisors or financial planners, review any old contracts for details on how to close one’s account with the current financial professional. Some key things to look out for are account closing fees, exit fees, mutual fund fees, sales charges or penalties, transfer limitations, and liquidity requirements. The incoming financial advisor or financial planner can also go over potential costs and taxes to expect from the transfer of funds and can also help with the logistics of transferring money and accounts if one is necessary (when switching financial service providers within the same firm, transferring funds may not be necessary).
Informing Your Old Financial Advisor
Informing one’s old financial advisor or financial planner is important in order for them to start the account closing process. A quick call or email can get the job done, while some firms require a formal termination letter. This process is simple and uncomplicated. Disclosing the reasoning for the switch is not required, and one may need to work with their new financial advisor or financial planner in order to get the process completed correctly. Making sure to end on good terms is essential, as one may never know when one may need to contact their old financial professional again when looking for specific records or documents, especially during tax season.
Gathering Old Documents
If one is transferring to a new firm, it is a good idea to make copies of specific documents and financial statements for recordkeeping. Downloading all documents and files to personal password-protected or encrypted devices can be crucial before one’s account officially closes. Another option is to have both the old and new financial advisors work together and stay in contact to transfer all necessary documents and information to their designated destination and ensure proper documentation.
- Spectrem Group. “It’s About More Than Money: Why Investors Switch Advisors.“
- U.S. Department of Health & Human Services. “Your Medical Records.“
- Securities and Exchange Commission. “Investor Bulletin: Transferring Your Investment Account.“
- Financial Industry Regulatory Authority. “Understanding the Brokerage Account Transfer Process.“