Updated: Aug 15
Many of us like certainty and prefer not to change course when we made a commitment. Whenever a change is made, I want to understand what propelled such a decision, especially in a service industry.
For example, I have a client who switched her OB/GYN 6 month into her pregnancy. Curious, I inquired about her decision to make this change at a relatively late stage. It came down to 3 major issues.
Her OB/GYN was notoriously late to appointments. And when they met, the OB/GYN sent her off after 5 minutes.
The clinic did a lot of extra tests that were not medical necessary, and my client spent countless hours resolving the issue between the insurance and the clinic.
My client felt like she was one of the hundreds being processed in the clinic instead of feeling taken care of during such an important life experience.
After each visit, my client left the appointment feeling the overwhelming sensation of redflags.
She believed she deserved better service, and ultimately followed recommendations from those within her community. She made a commitment to change to a doctor who matched her expectations, and brought her a sense of confidence and peace of mind after each interaction. She was happy that she did.
I found similarities between her story with many others who decided to switch financial advisors. While many may believe it would be a hassle to do so, 60% of individuals with financial advisors make a switch at least once.
Below are a few key tips on determining when the right time is for you to find a new financial advisor.
1. You only hear from your advisor once a year.
Does your advisor check in periodically to see if you need anything? Your advisor should send quarterly reports but also check in at least a couple times a year to see whether there have been changes in your personal life, business, or job situation that may impact your investment strategy and financial planning.
If you hear so infrequently from your advisor that you begin to feel unimportant, then it may be time to make a switch.
2. They don’t really care about your needs and goals.
Does your advisor create a financial plan to inform your investment needs and create a thoughtful recommendation? Or, does he or she just recommend an investment product without understanding your risk tolerance, lifestyle goals, and tax situation? Investing without a plan is like driving across Europe without GPS. Your investment strategy must be unique to your situation and not a cookie cutter strategy implemented to all clients at a firm.
On the flip side, if your advisor seems to nag you about getting your wills done, it shows that he or she cares about your family’s well being.
If you feel your financial advisor doesn’t care about your financial success, then it is time to find one that will.
3. Your advisor doesn’t coordinate with your attorney.
You are interested in creating an estate plan and don’t want to waste time on the details. Consider whether your financial advisor will have an initial meeting with you and your estate attorney to discuss your short and long term goals. Then see if your advisor, who also understands the drivers of your business and wealth, will strategize with your estate planning attorney to protect your wealth today and minimize taxes for your heirs in the future.
If your financial advisor is not initiating the next steps with your attorney and returning to you with results, then it may be time to consider if this is the optimal partnership for you moving forward.
4. Your financial situation is changing, but the advice isn’t.
If your income increases dramatically (over $400k per year), this can trigger the need for a review of your options to minimize taxes today and in the future. The simple advice of saving money in a Roth IRA is no longer sufficient. You may now be interested in tax deferred growth within an insurance vehicle, roth conversion strategies, or exploring ways to reduce taxes with charitable giving.
Your financial advisor should understand your changing needs and adapt your plans so you can continually optimize your performance. If this is not happening, then it is time to find a new financial advisor.
5. Your situation becomes more complex.
If you have a sudden windfall such as the sale of a business or exercising stock options that propel you into the high net worth space...say beyond $5, $10, or $25 million, you may need a review of how to protect your wealth from lawsuits, generate a steady stream of income through market ups and downs, manage your vacation properties, reduce your taxes, and protect wealth for the next generation.
Having an experienced wealth manager is critical for those in the ultra-high net worth class. Consider whether your financial advisor will coordinate with your CPA and estate planning attorney to meet these unique needs.
If your financial advisor has little to no experience or understanding of your new status, you may not get the most out of your partnership.
6. Your portfolio continues to have weak performance.
At the beginning of an investment relationship, your wealth manager should outline for you the expected risk and return you may anticipate from your investments. Short term deviations in performance are to be expected, but over a 7 to 10 year period, he or she should be in the ballpark of the projected return that was outlined in your financial plan.
Poor performance may not be a reason to fire your wealth manager, but at the very least you should consider a review of whether the investment strategy is still working.
Investing does involve risk and the current pandemic and low interest rate environment has put us in uncharted waters, but a consistently underperforming portfolio that isn’t providing for your lifestyle or retirement goals is one of the most common reasons for finding a new financial advisor.
7. You don't trust your advisor.
I have a friend whose advisor has become a terrible alcoholic. The last time we spoke, he hadn’t heard from her in months and was wondering what was happening with his money.
It is important to have confidence in the relationship with your financial advisor. Being that many financial advisors work with the same people for decades, if you lose trust in them for any reason, that can be very hard to repair.
If you are dissatisfied with the service your financial advisor is providing, then you’re probably ready to make a break. It may be worth a conversation with another advisor to see whether there could be a better fit for your family’s needs.
Emotionally speaking, breaking up with your financial advisor is hard to do. However, legally switching advisors doesn’t have to be. Once you’ve found a new firm to work with and signed an agreement, they will notify your old advisor and initiate the asset transfer.
We do recommend that your new financial advisor or wealth manager should create a comprehensive financial plan for your family, before making changes to your investments.
You should also be aware there may be financial ramifications to switching investment firms.
Read through your advisor’s contract to see if there is a termination fee. In many cases there are no termination fees. However, there may be trading costs, transfer fees, or tax ramifications depending on how investments are moved. Make sure to ask your new advisor to explain what those may entail.
Are you looking to make a change? See how Peak Wealth Planning can bring you peace of mind and confidence with your financial wellbeing. If you have more than $2 million saved and need a financial plan to reach your goals, the Peak Wealth Planning team can assist.
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About the Author
Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind.
Peak Wealth Planning provides concierge services to meet your wealth management needs. Services include: financial planning, investment management, esop diversification, retirement income, insurance, and estate planning advice. Peak Wealth Planning is a fee-based financial advisor based in Champaign, Illinois, and Fraser, Colorado.