8 Signs It’s Time to Change Financial Advisors

Sometimes, the question is not can you change financial advisors, but rather, should you change financial advisors? Perhaps you have noticed a lack of communication or feel like your goals are not fully understood. Maybe there are red flags like high fees or ethical concerns. Whatever the reason, it could be time to reassess the relationship. These are eight signs that it is time to seek a new financial advisor who better aligns with your needs and expectations.

SmartAsset can help you find a fiduciary financial advisor who’s required to act in your best interests.

Can You Change Financial Advisors?

Yes, you are absolutely allowed to change financial advisors at any time. There are no legal or regulatory restrictions preventing you from making this switch, as you have the right to choose who manages your financial portfolio.

However, before making the decision, there are several important factors to consider.

• Transfer fees: Some firms may charge fees for transferring accounts, so it’s important to ask about any potential costs before making the switch.

• Account transition: Ensure a smooth transition by confirming how long the process will take and if your new advisor will handle the transfer of assets on your behalf.

• Tax implications: Selling investments during the transfer may trigger capital gains taxes, so you should consult with both your current and new advisors to mitigate tax liability.

• Investment strategy alignment: Make sure your new advisor’s investment philosophy aligns with your financial goals and risk tolerance.

• Communication and reporting: Clarify how often the new advisor will communicate with you and provide reports on your portfolio’s performance.

8 Signs It’s Time to Change Financial Advisors

Not all relationships last forever. These are eight signs it is time to change financial advisors:

1. Ethical Concerns

Ethical concerns may arise if your financial advisor has disclosures of rule violations, civil penalties or even a criminal history. Any of these issues can undermine the trust you place in your advisor and raise questions about integrity. Past unethical behavior or legal issues could indicate that your advisor is not acting in your best interest and has failed to follow the code of ethics. This might suggest it is time to find a new advisor with higher ethical standards.

2. Lack of Communication

A financial advisor should keep you updated on your investments and any changes in your financial plan. If you find that your advisor is difficult to reach or fails to respond promptly to your inquiries, it may be a sign that they are not prioritizing your needs. Consistent and open communication is critical to a successful client-advisor relationship, and a lack of it could indicate it’s time to find someone more attentive to your concerns.

3. Misaligned Goals and Strategies

Your financial advisor should understand and support your financial goals. You may be concerned if you feel your advisor’s strategies are not aligned with your objectives or you feel pushed toward investments that don’t match your risk tolerance or long-term plans, it could be a red flag. An advisor should tailor their advice to your specific situation, and if the approach does not reflect your goals, it might be time to seek someone who better understands your financial aspirations.

4. High Fees

While financial advisors deserve fair compensation, excessive fees can erode your investment returns over time. If the cost of your advisor’s services is higher than average or you are charged for services that do not add significant value, it might be worth reconsidering the relationship. High costs can significantly impact your long-term financial progress, and switching to an advisor with a more transparent and reasonable fee structure could be beneficial.

5. Poor Performance

If your portfolio consistently underperforms the market or falls short of meeting your financial goals, it might be time to reassess whether your financial advisor is effectively managing your investments. While occasional dips are normal, a pattern of poor performance could indicate a lack of expertise or misaligned strategies. It may be prudent to seek an advisor with a better track record who can help you achieve more consistent, positive outcomes.

6. Personality Mismatch

A successful relationship with a financial advisor relies not only on expertise but also on personal rapport. If you find that you consistently clash with your advisor, feel uncomfortable discussing your finances or sense that they do not fully respect your opinions and preferences, it could be a sign of a personality mismatch. In such cases, finding an advisor with whom you can build a more trusting and collaborative relationship might lead to better financial outcomes.

7. Conflicts of Interest

Financial advisors should act in your best interest but conflicts of interest can sometimes get in the way. If your advisor receives commissions or incentives for recommending certain products or prioritizes their own financial gain over your needs, it could lead to biased advice. These conflicts may compromise the objectivity of the guidance you receive, making it necessary to seek out an advisor who operates with greater impartiality and transparency.

8. Not Enough Transparency

Transparency is crucial in any financial advisory relationship. If your advisor is vague about their fees, reluctant to explain investment decisions or unwilling to provide clear, detailed reports on your portfolio’s performance, it could be a sign that they are not being fully open with you. A lack of transparency can erode trust and make it difficult for you to feel confident in your financial decisions. Seeking an advisor who is more forthcoming and transparent may help restore your peace of mind.

How to Change Financial Advisors

When you are ready to change financial advisors, following a structured process can help ensure a smooth transition and safeguard your financial interests. These are the steps to guide you through the process.

1. Review your current agreement: Check your contract to understand any potential penalties or required notice periods for terminating your relationship with your current advisor.

2. Research new advisors: Look for a new advisor who better aligns with your financial goals and values. If you need help finding a new advisor, SmartAsset can match you with up to three vetted financial advisors who serve your area.

3. Notify your current advisor: Provide formal notice to your current advisor in writing. Be clear about your decision, and ask for a summary of any pending matters.

4. Transfer your assets: Coordinate with your new advisor to transfer your accounts and investments. They can help ensure a smooth transition while minimizing any disruptions to your financial plan.

5. Monitor the transition: Keep an eye on your accounts during the transition to ensure everything is transferred correctly and nothing is missed.

6. Establish communication: Set clear expectations with your new advisor regarding communication, goals and the ongoing management of your financial plan.

Bottom Line

Choosing the right financial advisor is a significant decision that can have a lasting impact on your financial future. It may be time to reassess your relationship with your advisor when trust, communication and alignment of goals are compromised. By recognizing the signs and taking the appropriate steps for change, you can find a professional who supports your financial aspirations and provides the transparency and ethical guidance you deserve.

Tips for Finding a Financial Advisor

• Before choosing a financial advisor, research the advisor’s background and credentials through resources like the SEC’s Investment Adviser Public Disclosure (IAPD) website or FINRA’s BrokerCheck. These platforms provide information about the advisor’s work history, certifications and any disciplinary actions. You can also read reviews or ask for referrals from trusted sources to ensure the advisor has a solid reputation for reliability and trustworthiness.

• Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

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