How to know it’s time to break up with your financial advisor

How to Know It’s Time to Break Up with Your Financial Advisor

It happens, relationships get boring and unfulfilling — whether it’s a friendship, relationship, or business partner. Sure, financial advisors won’t send you flowers or drop in randomly to check on your well-being. But they should be winning you over with timely, solid advice and proactive support. If not, it might be time to let them go.

For every 10,000 U.S. adults over the age of 25, there is less than 10 personal financial advisors. That is based off Bureau of Labor Statistics’ report that there are 218,100 personal financial advisors in the U.S. as of last year. With that in mind, it is hard to find a dependable financial advisor in the first place, so breaking up with yours can be an even more difficult decision when it’s hard to find a replacement.

What your financial advisor should be doing for you

Up-to-the-mark financial advisors are consistent. Regular reviews should be occurring at least annually, but it is ideal to review your financial goals and comprehensive financial plan more often. This includes retirement planning, education planning, cash flow planning, estate planning, and other goal-based planning priorities you have.

Your advisor should review your estate planning documents and help you create your estate plan if you do not have one yet. Then they should also assist with implementation and monitoring your plans moving forward for any needed changes.

These regular reviews should also include evaluating your insurance needs, including property, casualty and term life insurance.

Your advisor should assist with tax planning, including marginal rate tax planning, assistance with stock options and charitable gift planning. Quality financial advisors manage your investments, including both reviewing asset allocation, rebalancing and tax loss harvesting, while also providing support and education to help clients stay on course.

…And what your financial advisor should not be doing

On the flip side, there are many items and actions financial advisors should not be doing and traits they should not be exemplifying. For one, exemplary financial advisors do not tell clients what to do, especially when it comes to what their clients’ goals and priorities should be. A financial advisor I know once said that he prefers to work with clients who “don’t ask questions” and do what he tells them. Financial planning should be a team effort with the advisors providing education, resources, and guidance where the client has the ultimate say. And questions should always be encouraged.

Advisors who discourage questions are also typically the advisors who avoid the hard discussions. Of course, we all prefer when markets are rising and our client’s financial goals are right on track. However, much of the real value of a financial advisor comes when the picture isn’t so rosy. Whether it is a down market or a difficult family situation, your financial advisor should be ready, willing, and able to tackle the hard conversations and difficult scenarios that come your way.

Aside from personality traits and advisor-style, let’s talk unacceptable practices. Your financial advisor should not be charging commissions and/or selling product — especially if they are not being transparent about it. Take this tax client I had as an example. They said their financial advisor only charged them only very minimal fees. But when summarizing the fees and expenses being reported through tax reporting forms, the client was shocked. And even worse, the financial advisor was with a broker-dealer, meaning they were not held to the higher fiduciary standard that requires an advisor to do what is best for their client — instead they were doing the minimum and just what was suitable. This standard, established as part of the Investment Advisors Act of 1940, outlines that a financial advisor must put their clients’ needs above their own. This prevents advisors from acting in their personal interest, even if a course of action could allow them to boost their personal income, and instead act in the best interest of their client.

Ethics such as these are what financial advisors should operate by, and clients must be aware of best and worst practices. And knowing this will help you spot when it might be time to cut your financial advisor loose.

Indicators of a poor financial advisor

As simple or cliché as it might be, the first red flag telling you it is time to cut ties with your financial advisor is a gut feeling. If you find yourself not knowing who or how to ask a financial question or inquire about an issue, this could mean your financial advisor is not a great resource. As a senior wealth manager with over 20 years of experience, I am always amazed when people who have a different financial advisor reach out to me with their financial, tax, and estate planning questions. Not feeling comfortable asking your advisor questions or feeling confident that your advisor will provide helpful and timely assistance is a strong indicator that it may be time to move on.

Another sign your financial advisor might not be cutting it is if your financial advisor is difficult to get in touch with. Communication is key, and if you cannot reach your advisor with pressing questions or as situations arise, they aren’t the one for you. Just like in dating, ghosting is not acceptable.

Other red flags include if your financial advisor is not explaining things in a way that resonates with you or if your financial advisor does not help you feel confident in your financial future. Similar to a partner, your advisor should make you feel safe and sound. So, what do you do when you are experiencing these behaviors from your financial advisor?

Perhaps the most obvious red flag is an advisor who lacks transparency and follow through. This can include everything from providing updates on the status of your financial planning action items to the performance of your investment portfolio. Your advisor should be ready and willing to review the results of your investment portfolio including your specific investments, asset allocation and investment results against the appropriate benchmark. Advisors certainly can’t control the market, but they can help in ensuring that you understand and are in agreement with the investment approach being taken. If your advisor is unable to do that, it is possibly time for a new advisor and game plan.

When to give feedback

Difficult conversations can be tough, and especially awkward when they are supposed to be the expert. When is it appropriate to give feedback to your financial advisor? If you have previously had a strong relationship with your financial advisor overall, you think they are highly capable and have your best interest at heart, then it is definitely appropriate to provide feedback. Then see if there is an improvement following your talk.

After all, this is your future and finances we are talking about here. Do not be afraid to communicate what you want or what you need. Maybe the advisor is in a rut, operating on autopilot and just needs a reminder. Letting people know is always the best practice. A good financial advisor wants to serve you well and will be receptive to any and all constructive feedback.

How to give feedback

But how do you let someone know they are not giving you everything you want? Here’s some advice to help you give feedback and navigate what could be a difficult conversation.

Focus on specific areas that can be improved for the future, rather than offering only general criticisms or spending too much time dwelling on the past. Constructive criticism is key, and people always respond better when criticism and feedback are constructive. For example, rather than telling a financial advisor that they never address your concerns about retirement, tell them that at your next meeting you would like to review your financial plan to determine your financial success rate should you have an early retirement. Be proactive, not reactive.

Another approach you could take is to request a review of the financial services they offer and then develop a plan together on what that will look like moving forward. Maybe the initial plan was meeting throughout the year and now they are only communicating with you when they’re responding to an inquiry you send. Or maybe they offered comprehensive financial planning, but when you meet, you only get a cursory review of investments with no additional planning. Sometimes it requires starting from scratch to get a relationship back on track.

But maybe it’s unsalvageable. Maybe your feedback is not being well received or maybe the financial advisor is just not equipped to provide the services you need. Then this is another possible sign that it’s time to move on.

How to break up with your financial advisor

Break ups are never fun. But what can make it easier is knowing that moving financial accounts from one advisor to another is relatively straightforward and just about everything can be done by the new financial advisor. For many, that concern is what holds them back when considering switching financial advisors. No one likes a hassle, but there does not have to be one. Here are four actions you should take to move your financial account to another advisor.

1. Find a new financial advisor

You may already have one in mind. Maybe it is an advisor referred by a friend or neighbor. Whoever it is, do your research. Assess your needs. Ask yourself if you are looking for estate planning, retirement planning, tax help, general budgeting, investing advice, savings plans? What you are looking for will help inform you of what type of advisor you need.

Research potential advisors’ fee structure, whether they adhere to the fiduciary standard, their client reviews, and so on. You don’t want any surprises like my previous client.

2. Sign their forms, after reviewing

Generally, the new advisor will have their own internal forms to review and sign. These forms might include a wealth management agreement and investment policy statement that reviews the scope of services, responsibilities, and procedures of the new financial planner as well as the fees that will be charged.

3. Create an onboarding plan

Your new financial advisor should explain to you what the onboarding process will look like, including meeting cadence, topics to be addressed and plan for investment implementation. This will help ensure that your relationship with your new financial advisor gets off to a strong start and reduce uncertainty about the process.

4. Transfer your investment assets

Once signed, the new financial advisor will then generally need to open a new custodial investment account and initiate a transfer of the investment assets. Luckily, these forms can usually be signed electronically, which cuts down on quite a bit of administration work.

Most publicly traded investments can be moved “in-kind,” meaning that there is not an immediate tax consequence to moving the assets (i.e., the investments do not need to be sold prior to moving), although sometimes an account will hold proprietary funds that will need to be liquidated, as they cannot be held by a different custodian. Your new financial advisor should review your holdings and discuss any of these issues with you when creating the onboarding plan.

Even though your new financial advisor will try to minimize the hassles for you, before the transition begins double check that you have access to your financial documents and that you have and saved copies of your recent statements.

At the end of the day, financial advisors know the importance of financial planning, reviews, and organization. Break ups are hard. But don’t let staying in a bad relationship jeopardize your short-term financial goals or long-term financial wellness.

Susan Jones is Senior Wealth Manager at Plancorp, a full-service wealth management company serving families in 46 states. Susan is a licensed attorney and CFP who passionately provides wealth management services.


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