Breakups are never easy, but ending a relationship with your financial advisor can be especially difficult. They’re the person you’ve dealt with on a regular basis, often for years. They know your hopes, dreams, and all the details of your finances — something many people consider even more personal than their sex lives.
But sometimes, you realize your financial advisor just isn’t right for you. And you’ll only hurt yourself by trying to hold on to the relationship.
Here are five signs it’s time to move on and look for a new financial advisor.
Pro tip: If you decide it’s time to find a new financial advisor, start by using a free tool from SmartAsset. After answering a few questions, they’ll match you with up to three vetted fiduciary financial advisors in your area. Get started with SmartAsset.
Reasons Why You Should Let Go of Your Financial Advisor
Breaking up with a financial advisor isn’t a decision to make lightly. After years of relying on the same person for financial advice and financial planning, it’s hard to get used to someone new. Just like a romantic relationship, the relationship between advisor and client isn’t worth throwing away over a trivial difference of opinion.
But some problems are too big to ignore. Financial experts, such as certified financial planner Tanya Nichols of Align Financial and personal finance writer Rebecca Lake of SmartAsset, say these are five of them.
1. You Can Never Get Hold of Them
When you’re trusting another person with your money, you want to be able to reach that person quickly. Sometimes, you just can’t wait until your next scheduled meeting to make a change in your account. If something in your life changes suddenly, such as getting engaged or leaving your job, you need to be able to adjust your accounts to the new situation as soon as possible.
But if your financial advisor is never in the office when you call and leaves your phone calls and emails unanswered for days or weeks at a time, you can’t make the changes you need. By ghosting you, they’re essentially cutting you off from your own money.
You can’t expect your financial advisor to be on call 24/7. But if you call or email them with a question, it’s not unreasonable to expect them to get back to you within a day or at least have a member of their staff check in with you.
Responding to your questions and concerns is part of your financial advisor’s job. If they’re not doing it, you have every right to break ties.
2. They Don’t Listen to You
It’s no use being able to get in touch with your financial advisor if they don’t listen to what you have to say. To create a financial plan that works for you, your advisor needs to understand your situation — including your income, expenses, financial goals, and risk tolerance — and choose investments to fit it. A client who wants to retire early needs very different investments from one whose main goal is to put four kids through college.
However, advisors don’t always pay attention to their clients’ needs and wishes. For instance, in July 2019, the Financial Industry Regulatory Authority (FINRA) awarded six investors — including four retirees — a total of $1.16 million because an investment company had inappropriately put their money into complex, high-risk investment products.
It’s not always easy to tell when your financial advisor isn’t listening to you. The investors in the FINRA case didn’t discover the inappropriate investments until more than five years after buying them. To avoid ending up in a similar situation, watch out for these warning signs:
They Don’t Seek Your Input
A financial advisor is supposed to do just that: advise you on how to handle your money. That’s not the same as taking control and doing what they like. Your advisor’s job is to offer you investment options and then let you decide which is right for you. If they never do that, it’s a red flag.
They Don’t Ask About Your Goals
Many investors share common goals. For instance, many young investors are interested in buying a home. In middle age, they might focus on saving for their kids’ college education and building retirement savings. And in their 60s, estate planning could become a priority.
But what works for many people might not work for you. The only way for your advisor to know your goals is to ask you about them. If they don’t, they can’t help you work toward them.
They Ignore Your Feelings About Risk
As a rule, you should invest heavily in stocks while you’re young and shift toward lower-risk investments as you age. But this rule of thumb doesn’t work for everyone. Some people just have a higher or lower risk tolerance than their age would suggest.
If you need safer investments to be able to sleep at night, your advisor should respect your wishes. They can encourage you to take on more risk for the sake of a better return, but simply dismissing your concerns is a big no-no.
They Oversell You
A financial advisor who has your interests at heart explains why a particular investment fits your needs, then lets you make the choice to buy or not. But some advisors don’t like to take no for an answer. They aggressively push you toward specific investments — sometimes just because they believe in them, sometimes because they’re earning a juicy commission.
If your advisor keeps giving you a hard sell on an investment you’ve turned down, either they’re not listening to what you have to say or they just don’t care. For someone you’re trusting with your money, both options are unacceptable.
3. You Can’t Understand What They Say
Communication is a two-way street. Your financial advisor shouldn’t just listen to what you have to say; they should also talk to you in terms you can understand. Unfortunately, many advisors aren’t good at this. They use a lot of financial jargon, slinging around terms like “alpha,” “beta,” and “margin” without bothering to make sure you understand what they mean.
A good financial advisor should be able to explain, in plain English, what an investment is and why it is or isn’t a good choice for you. They should also encourage you to ask questions or stop them if there’s anything you don’t understand.
If your advisor doesn’t do this, either they don’t want you to understand your investments or they don’t know how to make them understandable. Either way, they’re not helping you make smart choices.
4. They Hide Information From You
Even worse than a financial advisor who tells you things you can’t understand is one who doesn’t tell you things at all — especially things you really need to know. Someone who does that is either forgetful or actively hiding something from you. Either way, it’s not what you want from the person handling your money.
When it comes to finance, what you don’t know can definitely hurt you. If your financial advisor doesn’t share important information, it could mean you’re paying more than you need to in fees or getting lower returns than you should on your investments. Worse still, it could be a sign you’ve been roped into an outright financial scam.
Here are some details your financial advisor should be upfront with you about:
How They Make Money
Advisors make their money in two main ways: They can collect fees from you, or they can earn commissions on sales of specific funds. In general, it’s better to have an advisor who makes money from fees only because then they have no incentive to sell you products that aren’t ideal for you.
It’s not necessarily a deal breaker if your advisor makes some money from commissions, as long as you know about it. That way, when they offer you an investment they’re being paid to push, you can take their advice with a grain of salt. But if they receive commissions without saying so, you have no way of knowing whether the advice they give you is truly impartial.
How Much You’re Paying in Fees
You have a right to know not just how your financial advisor gets paid, but also how much. You wouldn’t hire a contractor to work on your house without getting a quote first. It makes just as little sense to hire a financial advisor without knowing the actual dollar amount it will cost you.
Consider this: If your advisor is collecting a 3% fee every year for managing your $500,000 portfolio, that’s $15,000 coming out of your pocket. You need to know how much you’re paying for your advisor’s services to decide if they’re worth the price.
Why They Recommend an Investment
When your advisor recommends an investment for your portfolio, they should provide a clear explanation of what the investment is. Moreover, they should be able to explain why they think it’s a good choice for you in particular.
If your advisor doesn’t offer this information, or they only say something vague like “It’s a really good fund,” that suggests they have something to hide. Maybe they’re only recommending the investment because they’re earning a juicy commission on it and it’s not really a good fit for you at all.
Where Your Money Is Being Held
A good financial advisor doesn’t simply keep your money in their own hands. Instead, they put it into an account at a business, such as a bank or brokerage. This business is called the custodian of your account.
If you don’t know who your custodian is, you have no way to check on your account and make sure your money is all invested as it’s supposed to be. If your advisor doesn’t tell you the name of your custodian or how to access your account there, that’s a huge red flag.
5. They Don’t Live Up to Their Promises
If your financial advisor pitches you an investment that’s “guaranteed to beat the market,” be wary. At best, they’re promising more than they can deliver. At worst, they’re flat-out lying.
In the real world, there’s no such thing as an investment that beats the market 100% of the time. If there were, everyone would invest in it, and the market itself would quickly change to reflect this. Promising an unbeatable return is one of the warning signs of a Ponzi scheme, a financial scam that pays off old investors with new investors’ money and never yields anything.
Any time an advisor makes this promise, or any other promise that sounds too good to be true, there’s a risk they’re involved in a Ponzi scheme. Maybe they’re in on the scam, or maybe they’ve just fallen for someone else’s con job, but either way, they’re not giving you sound advice.
Of course, financial advisors sometimes fall short of their promises even when those promises seem realistic. In most cases, it’s due to an honest mistake. Everyone’s human, and even the best money managers sometimes guess wrong about which types of investments will do well.
If your portfolio fails to meet its benchmarks one year, give your advisor a chance to explain why. If their answer sounds reasonable, they probably deserve another chance. However, if your investments consistently underperform year after year, it’s probably time to look for someone else to manage them.
Final Word
Dumping a financial advisor who doesn’t take good care of you and your money is just like dumping an abusive or unfaithful spouse. It’s not easy, but it’s best to make a clean break so you can move on and find someone better for you. When you’re putting your money and your future into another person’s hands, you shouldn’t settle for less than the best.
However, sometimes it’s no one’s fault when a relationship doesn’t work out. Two people just grow apart and discover they’re no longer right for each other. It can happen with your financial advisor too.
For instance, if you start out with only modest investments and then have a sudden financial windfall, your investment situation becomes a lot more complicated. You need a financial advisor who can deal with complex investment strategies to help you put your newfound wealth to use. Other changes in your financial situation, such as the deaath of a spouse or the birth of a special-needs child, could also call for a new advisor with a different set of skills.
In this situation, you and your financial advisor can break up with no hard feelings. Your old advisor can even help you out by recommending a new advisor who can help you with your new financial needs.
