It happens! Most people have had several financial advisor relationships over their investment lifetime. It makes sense. As investors we have different stages and financial needs during our lifetime. Your need for financial advice is quite different at age 30 than it is at age 60. Individuals change financial advisors for several reasons, but poor market performance or high fees are not always the primary reason. Communication, or lack of, is a big issue. In the new world of technology, there are several ways your advisor can communicate; however, if you have not had any communication from your advisor for long periods of time, it might be time to look elsewhere.
Poor communication from your advisor can lead to poor investor behavior, such as buying or selling at the wrong time and can make you feel like the advisor is “asleep at the wheel.” Performance is certainly a factor. If you have had an investment for 5 to 7 years and end up with less money than when you started, it’s time to ask for answers. Meetings with pie charts and mumbo-jumbo about portfolio diversification, investment horizons and technical statistics do not help investors to understand lack of performance. It can lead to further dissatisfaction. Your advisor will best serve you by acknowledging under-performance and being forthright about it.
Lack of human interaction is another big reason why investors fire their advisor. Most of us can tolerate and understand the ups and downs of the market, changing economic cycles and changes in our interest rate environment, but only if they feel their advisor is monitoring the situation and keeping them informed. Nobody wants to be in the dark when it comes to their money, especially in troubling times. As investors, we need reassurance in order to maintain and build a strong working financial relationship.
Switching financial advisors can be an ordeal. It is more complicated than saying, “good-bye, I am leaving you.” There can be service fees, potential tax liabilities and lots of new paperwork. Really review your new advisor. Remember you are leaving your old advisor for good reasons. Your new advisor should review with you any fees you might incur as well as any tax implications for the transfer and subsequent new investment recommendations.
Do you have to contact your old advisor? It’s always a nice gesture and often can improve the transfer process, especially if you have had a long-term relationship. Your new advisor will guide you through the process and will initiate the paperwork on your behalf. Will your old advisor contact you directly once transfer paperwork has been submitted? Probably not. Because of technology and the electronic transfer of accounts, an advisor is often the last to know once an account has been moved elsewhere. Don’t be insulted if you don’t get that call from your old advisor.