Unhappy With Your Financial Advisor? Here Are 7 Steps To Take

Managing your finances is a significant responsibility, and many individuals rely on the expertise of financial advisors to navigate the complexities of investing, saving, and planning for the future. However, what happens if you find yourself dissatisfied with your financial advisor? Whether due to poor communication, subpar performance, or other issues, understanding how to address your discontent is crucial. This article explores the steps you can take, from assessing the situation to finding a new one.

1. Assess Your Reasons

Before taking any action, identify the exact reasons for your dissatisfaction. This will help clarify whether the issue is temporary or something deeper. Common reasons include poor communication, misalignment of goals, consistent underperformance, high fees, or ethical concerns.

Inadequate interactions may leave you feeling out of the loop regarding your financial progress or changes in strategy. Misaligned goals could arise if the advisor’s recommendations don’t reflect your financial objectives, risk tolerance, or life stage. Consistent underachievement, such as when your portfolio falls behind market benchmarks, can also be a significant cause of concern. Finally, ethical concerns, such as conflicts of interest or behavior that benefits the advisor more than you, may warrant immediate action.

Once you’ve identified your concerns, evaluate whether the issues are resolvable. Are the problems rooted in misunderstandings, or are they the result of external factors, like market conditions? If the issue is primarily communication or strategy, these might be solvable through direct conversation. However, if trust is broken due to persistently poor investment returns or ethical issues, it may indicate more serious problems.

2. Express Your Concerns

Discuss the problems with your advisor openly and directly. Schedule a formal meeting to lay out specific examples, such as periods of misaligned strategy or below-average returns. You should approach this conversation constructively and ensure your advisor understands exactly where you believe they’ve fallen short.

Be prepared to outline your requirements to maintain the relationship moving forward. Set measurable targets. Whether it’s more frequent consultations, better explanations of strategies, or more transparent fee structures, being specific about your expectations can help guide the discussion toward actionable solutions.

During the meeting, note how your advisor responds to your concerns. Do they take responsibility and offer solutions, or do they become defensive and dismissive? An advisor who values the relationship will listen, address the issues, and commit to improvements. However, if they fail to respond positively or make changes, this may be a sign that the relationship cannot be repaired.

3. Review Your Options

You may not always need to sever ties with your advisor. Instead, consider adjusting your relationship. Some firms offer varying service levels based on a client’s portfolio complexity or the frequency of required interactions, which may offer you a more suitable alternative without leaving the firm.

Another option is to ask for a reassignment to a different advisor within the same firm, especially if your current advisor’s expertise isn’t the right fit for your financial goals.

However, if these changes don’t resolve the situation, leaving your financial advisor may be the best course of action. Chronic underperformance, unresolved communication problems, or ethical concerns are all valid reasons for seeking a new advisor. Before making this final decision, carefully review your contract or advisory agreement. Some firms impose penalties for early termination or for transferring accounts. Understanding these terms will help you prepare for a smooth exit.

4. Terminate The Relationship

Once you’ve decided to move on, it is imperative to notify your advisor. Send them a professional email or letter to have a formal record of your decision. Doing so also helps initiate the next steps for transferring your accounts. Most advisors are legally obligated to assist with this process and should provide a clear timeline for how long the transfer will take.

Inquire about potential fees because some firms impose penalties for closing accounts or moving assets, particularly if you have specialized portfolios or complex investments. Transferring assets in-kind can help you avoid selling them and incurring taxes or penalties associated with liquidation.

Remember to keep a close eye on your accounts during the transition. Ensure that all paperwork is processed accurately and that the new advisor or custodian has received everything needed to transfer your assets.

5. Find A New Financial Advisor

Research potential advisors who are highly credentialed and have strong reputations. Certifications like CFP, CFA, or RIA are indicators of professionalism and expertise. You should also verify with regulatory bodies like FINRA or the SEC whether the prospective advisor is in good standing by reviewing their professional backgrounds or any disciplinary actions or complaints against them.

It is essential to conduct formal interviews with prospective advisors. Ask about their investment philosophy, fee structure, and how often they interact with clients. Your goal is to find someone whose approach aligns with your financial goals and preferences. You should also solicit references from clients with similar financial profiles, as this will provide insight into how the candidate might handle your situation.

Before committing to a new advisor, conduct thorough due diligence. The ideal candidate should willingly provide detailed information about their services, fees, and any potential conflicts of interest. If not, move on to the next one.

6. Protect Your Finances During The Transition

Review your portfolio thoroughly. Make sure you understand the specifics of your current investments, including any restrictions, fees, or tax consequences associated with moving them. Your new advisor will need to be fully aware of these details to ensure your portfolio is managed effectively from day one.

Regular updates with your old and new advisors will help avoid mistakes during the transfer process and ensure that all documents and assets are handled correctly. Being proactive during this process helps prevent errors and sets the foundation for a more productive relationship with your new advisor.

7. File Complaints Or Take Legal Action (If Necessary)

If your discontent stems from illegal behavior or any other misconduct, it’s important to take appropriate action. You can report unethical behavior to regulatory bodies like FINRA, the SEC, or your state’s securities regulator. Filing a formal complaint ensures that your concerns are investigated and can result in disciplinary action against the advisor.

If you’ve suffered financial losses due to negligence or potentially illicit activities, consult an attorney who specializes in financial matters to help you explore options for restitution. Legal avenues such as arbitration, mediation, or even lawsuits may be necessary to recover lost funds or resolve disputes.

The Bottom Line

Being unhappy with your financial advisor can be frustrating, but you should approach the situation methodically. First, identify and relay your concerns to give your advisor a chance to address them. If the issues persist, carefully review your options for finding a new advisor, ensuring your finances are protected during the transition. By taking these steps, you can safeguard your financial well-being and ensure you’re working with an advisor who aligns with your goals and values.