When should you change your financial advisor?
In brief, consider changing financial advisors if you lose confidence in your advisor. In addition, if you're dissatisfied with your advisor’s communication, you may wish to start looking for a new financial advisor. If there's a lack of transparency and trust, you should start looking for a new advisor immediately.
Your advisor’s actions must align with your needs and values, and they should take the time to get to know you and your goals.
Keep reading for the 10 signs it's time to change your financial advisor.
Author: Michael Urch, CFP®, Senior Wealth Manager
10 Signs That You Should Consider Changing Financial Advisors
While it doesn’t make sense to change your financial advisor at the drop of a hat, there are times when a new advisor might be a smart move.
The most important reason to look for a new advisor is if your current advisor lacks the resources and knowledge to manage your wealth effectively.
For example, if you suddenly increase your net worth, your current advisor may not have all the wealth management resources you need. Moreover, if your advisor is not a fiduciary, you may not feel confident in their ability to make decisions in your best interest.
1. Lack of Communication
Your advisor does not regularly update you or respond to your inquiries in a timely manner.
If you call your advisor, it’s important that they call you back within a reasonable period, ideally one business day. Most advisors send out reports about the markets 1-2 times monthly and have annual or quarterly meetings with their clients.
If you feel unhappy with the level of service and communication you’re getting, consider looking for a fiduciary financial advisor with more resources and better ability to meet your needs.
2. Misaligned Investment Strategies
The advisor's investment recommendations consistently conflict with your financial goals and risk tolerance.
While this may be hard to judge, it may be time to look for a new advisor if you ask questions and do not get satisfactory answers.
3. Opaque Fees
If you're unclear about how your advisor is compensated or notice unexpected fees on your statements, make sure you ask your advisor about this.
Be aware of being overcharged by advisors who buy and sell frequently or who create your portfolio with packaged products that have very high fees.
4. Performance Concerns
Your portfolio consistently underperforms relevant benchmarks without a satisfactory explanation.
While nobody should be trying to “beat the market,” there are times when you might be reasonably suspicious about your advisor's performance.
For example, let’s say the market has been on an upward trend for a year. You’re under 40 and have a high-risk tolerance because you don’t plan on retiring until you’re 65. However, your portfolio is down 10% or has seen zero growth.
This might be time to ask some questions and find out what’s going on.
However, if you look at the S&P 500 and see that your portfolio has grown by 10% while the S&P has grown by 15% in the same time period, this does not mean it’s time to toss your advisor aside.Understanding risk management and how that plays into your portfolio is essential.
Some strategies are too risky for an advisor to take on behalf of their client.
For example, in the past year, much of the stock market’s growth has come from 7 individual companies. Thus, in most cases, your portfolio will perform below the S&P 500. Why? It would be relatively risky for your advisor to create a portfolio that is an exact match for the S&P 500 because seven companies are responsible for much of the current growth.
5. Limited Services
The advisor offers limited services and lacks expertise in areas critical to your financial situation, like tax planning or estate management.
The greater your wealth, the more important it is to work with an advisory team with expertise in tax, financial, and estate planning. If possible, work with a team that has many different advisors on staff.
At 360 Financial, we have specialists in various areas, which allows us to serve our clients at the highest level.
6. Ethical Concerns
You have reasons to doubt the advisor's integrity or have noticed questionable practices.
7. Lack of Personalization
The advice you receive seems generic and not tailored to your specific needs and circ*mstances. It doesn’t seem like they really know you and your goals.
8. Resistance to Change
The advisor is unwilling to adapt strategies in response to changes in your life or financial goals.
Perhaps you’ve seen a significant change in your life, but your advisor has not created a new financial plan to reflect that change. This is a red flag.
9. Poor Relationship Dynamics
You feel uncomfortable or undervalued in interactions with your advisor. It feels like your advisor is talking down to you or evading your questions.
10. Regulatory Red Flags
The advisor has a history of complaints or regulatory issues raising concerns about professionalism.
Common Questions
Is it a good idea to change financial advisors?
It is a good idea to change financial advisors if your current advisor is not acting in accordance with your financial goals, communication preferences, or ethical expectations. If you feel uncomfortable with your advisor in any way, it may be time to start looking for someone who you can trust.
How often do people switch financial advisors?
People often switch financial advisors when they experience significant life changes or feel their current advisor is no longer suitable, but there is no set frequency for making such a change.
Ideally, your financial advisor is a long-term partner who gets to know you and your family well and helps you build towards your goals. If you don’t feel comfortable with your advisor, don’t hesitate to look for other options.
How long should you keep a financial advisor?
You should keep a financial advisor as long as they are meeting your needs and helping you pursue your financial goals, with the duration varying based on individual circ*mstances.
What should you do if you are not happy with your financial advisor?
If you are unhappy with your financial advisor, you should first communicate your concerns directly with them; if unresolved, consider finding a new advisor. If you’re looking for a new advisor, we strongly recommend seeking a fiduciary financial advisor.
These days, you don’t have to work with the advisor down the street. So consider finding a top-notch advisor with whom you can work over Zoom. You can get exceptional service and guidance if you go outside your region.
What are some common signs that indicate I should switch advisors?
Common signs that indicate you should switch advisors include a lack of communication, misalignment with your financial goals, poor performance, and a lack of personalized advice.
When should I reevaluate my relationship with my financial advisor?
You should periodically reevaluate your relationship with your financial advisor, especially after major life events or if your financial goals or personal circ*mstances change.
Are there specific life events that might warrant changing advisors?
Major life events that might warrant changing advisors include retirement, inheritance, marriage, divorce, or significant changes in financial situation.
What steps can I take to find a new financial advisor if needed?
To find a new financial advisor, you can start by seeking recommendations from trusted sources, researching potential advisors' credentials and reviews, and interviewing several candidates to assess their fit with your financial needs and preferences.
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About the Author
Michael Urch
As a CERTIFIED FINANCIAL PLANNER,™Michaeladvises his clients on insurance planning, investment planning, retirement income planning, tax planning, and estate planning. He prides himself on being a professional advisor who puts planning before products. This is one of the reasons he was attracted to 360 Financial’s client-focused culture. Michael likes to start with each client’s “why.” By understanding what’s truly important to them, the “what” of investment and planning strategies can be custom-designed to support their long-term ambitions.
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How to Choose a Good Financial Advisor
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This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
