Rosalind Evans
The relationship with a financial advisor can be crucial for achieving your financial goals. However, it isn’t always perfect. If you’re wondering whether it’s time to seek a new advisor, here are three factors you should consider.
Quality of Financial Advice
One of the main reasons for breaking up with a financial advisor is the quality of the advice received. According to a 2023 analysis by Morningstar, the most common reasons for firing an advisor include feeling uncomfortable with the level of risk, not receiving the expected direction, or perceiving cookie-cutter solutions.
Samantha Lamas, a senior behavioral researcher at Morningstar and co-author of the report, explained: “Their critique is of what the advisor is offering, not exactly the performance of their investments or how much the advisor is costing or charging them. It’s all about the services the advisor provides.”
Quality of the Relationship
People hire financial advisors not only for their expertise but also for the relationships they can build. Danielle Labotka, a behavioral scientist at Morningstar, noted, “They want financial advice that is suited for them.”
It’s essential to ask yourself if the advisor knows you well and understands your goals. Tim Maurer, chief advisory officer at SignatureFD, emphasized: “Do you feel like they know and understand you well, and what is important to you and your goals?”
Cost of Services
The cost of a financial advisor’s services can vary widely. However, it isn’t just the cost that leads clients to break up with their advisors, but the perceived value received in return.
Labotka commented: “Even though people know how much they were paying somebody, they may say, ‘I don’t see how I’m getting my money’s worth here.’”
James Lee, founder of Lee Investment Management, added: “It’s important at the outset and throughout the engagement that the client and advisor understand the scope of services provided and the compensation that the advisor will be paid so that the client can understand the value of the services their financial advisor is providing them.”
How to Manage an Advisor Breakup
Breaking up with a financial advisor can be challenging and complicated. Maurer stated, “It’s not a small thing to decide this.”
To manage a breakup, it’s crucial to understand the process for severing ties with the advisor or firm. Lee recommended that “the process may include notification periods and any fees associated with early termination.”
It’s advisable to contact your advisor, thank them for their services, and notify them that you will be moving your accounts elsewhere. While explaining why you’re leaving is unnecessary, doing so as a professional courtesy may help improve the industry.
Breaking up with a financial advisor can be challenging, but ensuring your financial needs and goals are well met is essential. Evaluating the quality of advice, the relationship, and the cost of services can help you make an informed decision if you decide to move on; handling the breakup professionally and clearly will make for a smoother transition.
