Yahoo Finance 10 Signs You Should Fire Your Financial Advisor
Financial advisors can help get nest eggs in order and keep people on course for a healthy retirement. Households that use financial advisors are three times as likely as non-advised households to have $250,000 or more in retirement savings, according to a 2014 survey by LIMRA LOMA Secure Retirement Institute.
But that doesn't mean that every advisor is a perfect fit with everyone's preferences, communication needs and lifestyle. In fact, here are a few indications that it may be time to find another advisor.
Your advisor asks you to do something shady. If your advisor asks you to wire money, sign a blank form or check, seeks full power of attorney or asks for a check made out to someone other than the account's custodian, it's time to move your money to another financial advisor. "An advisor should never take custody of your investments if they have the ability to make investment decisions for you," said Susan Fulton, founder of FBB Capital Partners, an independent wealth management firm in Bethesda, Maryland. If you see signs of corruption, transfer your money immediately.
The firm isn't registered with governing authorities. Ask if your advisor is a registered investment advisor and the official name of his or her registered firm. Then check either through the U.S. Securities and Exchange Commission, the state (if the advisor is small), or, if the advisor is commission-based, through the Financial Industry Regulatory Authority's free tool for checking brokers. Also, check if your advisor has a series of disciplinary actions.
Your advisor doesn't return calls or emails. "If you're waiting days or weeks to hear back from your advisor, you deserve better," says Paul Jacobs, chief investment officer of Palisades Hudson Financial Group in Atlanta. "A lack of responsiveness can be a symptom of bigger problems, including a lack of organization skills or a lack of empathy for clients." This doesn't mean that you hound your advisor after every quarterly earnings report. But if you feel your advisor is only reactive to your calls and isn't thinking proactively, you may also want to look elsewhere, says Jennifer Acuff, a principal advisor at TrueWealth in Atlanta.
You aren't happy with the compensation structure. Ask if your advisor is commission-based, gets bonuses from the firm and if the firm owns any proprietary products. In short, you need to know if the advisor makes money from what he or she sells to you. Some advisors, called fiduciaries, are mostly fee-based, compared with brokers, who slice a commission from your assets and may charge other fees. Determine your comfort zone. "Asking the simple question of 'How do you get paid?' can shed light on where your advisor's loyalties are," says Mike Jurs, director of Financial Engines in Sunnyvale, California. "Don't worry -- you're not being rude. It's almost expected. After all, it's your money, and you should be sure that your advisor has your best interests at heart."
Your advisor doesn't explain risk. This is not a one-size-fits-all business. There should be a sit-down session before money changes hands to discuss your financial goals, what risks come with different investments and what fees you'll be paying. If don't feel you can disclose your full financial picture, it's not a fit. After the initial discussion, the lines of communication should remain open. "If your advisor continually gives you vague responses to your questions on risk in your portfolio and the fees you are paying, it may be time to look for an advisor that is more transparent," says John H. Foard III, senior wealth advisor for Hobart Financial Group in Charlotte, North Carolina.
There is a mismatch of opinions and goals. "If there is a difference of opinion on investment philosophy, time horizons or outlooks on risk, those may be common red flags that you should understand. If any of these situations rub you the wrong way, you must move on to a new advisor relationship," says Jerry Lombard, president of the private client group at Janney Montgomery Scott in Philadelphia. Keep in mind, however, that if you have lofty and unrealistic expectations for returns, risk and fees, it can make the advisor-client relationship choppy, Lombard says.
Your advisor doesn't have experience in the area you need. If you're planning for retirement while also saving for your child's education, working with an advisor who has experience in both of these areas is important, Lombard says.
You aren't being treated the way you want to be treated. Treating you like you just wouldn't understand things, or talking above your head and not listening to your goals is not OK. "We recently had a consumer [who transferred to us after she] felt that her advisor was not listening to her or her investment suggestions," says Raghav Sharma at GuideVine, and investor matching service in Manhattan. "Even though she had worked with this advisor for several years, she was increasingly feeling that he had placed her in the 'little old lady' bucket and was condescending when it came to answering her questions. She did not feel heard or understood by her advisor, who treated her like a pile of assets and not an actual client."
Your advisor is acting like a salesman. Promising lofty returns that can't maintain expectations usually gets an advisor fired -- or worse, Jacobs says. Some advisors get paid when your money shifts between investments, so the more churn they make by you shifting assets, the more money they make. The problem is that each shift usually costs you a fee. You should be skeptical if there is constant turnover in the portfolio generating massive fees, if your advisor is always pushing high-fee solutions or always selling insurance products as solutions, says Rocky Lalvani, who represents clients as an enrolled agent with the IRS and financial coach in Harrisburg, Pennsylvania. And some advisors offer long contracts that tie you up for years and guarantee them an income stream, he says.
Your advisor is secretive. No topic should be off limits for discussion. Financial planner Tim Plachta of Reliant Wealth Management in Austin, Texas, recalls a client who left her previous advisor because he refused to explain what she was invested in. "When she would ask him for an explanation, the only response she would get was, 'Don't worry -- it's invested in good stuff. It's all taken care of.'" Always ask yourself whether you can trust your advisor with your financial future.
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