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If you’re looking to build wealth, get ready for retirement or anything in between, you may find it helpful to work with a financial advisor. Not only can these experts guide your investments and saving during your working years, their advice can be vital to managing the complicated questions of taxes and withdrawals after you stop working. Further, a financial advisor can help you think holistically about your goals, resources, risk profile and timeline. But not every advisor-client relationship meshes well, so sometimes you need to make a switch.
If you’re not already working with a financial advisor, consider engaging one for financial planning, investment management, retirement planning and more.
According to research from Morningstar, there are six leading reasons that cause clients to part ways with their financial advisors:
Quality of financial advice and services (32%)
Quality of relationship with an advisor (21%)
Cost of services (17%)
Dissatisfaction with returns (11%)
Preference for managing their own finances (10%)
Poor quality communication (9%)
Of course there are other reasons as well, and sometimes clients cite more than one of the above-mentioned reasons for breaking up with a financial advisor.
As is the case in any kind of transition, it’s important to think carefully about both what you would like to accomplish and how you would like to accomplish it in the context of your client-advisor relationship. If you do, in fact, decide to leave a financial advisor, financial planning firm Facet has compiled a five-fold guide for managing the breakup. Here’s a breakdown of their tips:
Put things in perspective: Leaving an advisor is just a business decision in the same way that you’d drop the stylist who cuts your hair or the gardener who mows your lawn. You’re paying for a professional service, and if you’re not satisfied, it’s time to make a change.
Notify them, on your terms: While it’s not technically required, you should politely and respectfully inform your advisor that you’re making a change. Keep it brief and professional. You can do it with a phone call, email or personal meeting. First make sure you’ve got all your account details and documents in hand and get a confirmation from your soon-to-be ex-advisor signed by you both, on paper or via email.
Review the paperwork: You may have to settle any outstanding fees or charges, so check your agreement documents. If your advisor holds any of your assets in their own accounts, you’ll need to move that money to yourself or your new advisor. Be sure you don’t trigger any tax consequences, such as cashing out an IRA, which can also result in a tax penalty.
Reassess your financial situation: If you haven’t found another professional to swap over to, now is the time to reconsider your options. Examine your financial situation and goals and decide how you want to go forward. Some advisors manage your assets, while others will give you a plan that you can manage on your own. Interview several new advisors before handing over your portfolio and assets, and be sure to explore your risk tolerance with them all.
Look forward to having a better plan that meets your needs: The point of using a financial professional is that you can sleep at night. You know what your plan is, what’s happening with your money and that your plan can work in good times and in bad. If your investments dropped (as with the 2022 market swoon) you should be able to remain comfortable with your new advisor and your new plan.
You can also use this free tool to get matched with up to three vetted fiduciary financial advisors.
Woman terminates her relationship with her financial advisor.
If you’re dissatisfied with your financial planner, don’t suffer in silence. Reconsider what you want – and don’t want – in a financial advisor, how you want to work with an advisor and how your financial goals have changed.
“And remember, while it may be difficult to say goodbye, cutting ties with your financial advisor is often a part of growing and managing your money more effectively,” Facet says in its article. “So don’t be afraid to move on if it’s what’s best for you. With some preparation and careful planning, you can confidently make the transition to your new (and improved) financial life.”
Whether you’re looking for a financial advisor for the first time or seeking a new one, the process doesn’t have to be difficult. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have free introductory calls 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.
Fidelity recommends that you have 10 times your annual income saved for retirement by age 67. To find out if you’re on track, SmartAsset’s retirement calculator. This free tool will estimate how much you’ll have when the time comes to retire.
Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and offers marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.
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