You hire a financial advisor because you may not have the interest, time, or knowledge to manage your personal finances. And for these same reasons, it can be challenging to determine whether your advisor is adequately meeting your needs. Especially if your advisor is the only one you’ve ever worked with—or the only one you’ve ever even talked to! We work with many clients who wish they’d moved on from their previous advisor long before they did. How can you avoid a similar mistake? Here are the five reasons you may want to reconsider your current financial advisory relationship. Of course, if you aren’t currently working with an advisor and want to know where to begin, read our Viewpoint on the questions to ask before choosing an advisor.
Your Advisor Recently Sold Their Business
If your advisor is a sole proprietor or works for a small firm, then that firm may be sold when the founder(s) approaches retirement. Clients shouldn’t necessarily change advisors just because a firm is sold. However, you should evaluate the buyer and changing circumstances closely. Ideally, the buyer has a like-minded philosophy and plans to maintain a comparable approach and level of service.
If your advisor is bought out by a national conglomerate, you should consider how the non-local, corporate ownership may affect you. Will service become less personalized and advice less tailored? Will your advisor face pressure to recommend new products or services? Gaining access to new “opportunities” can be enticing but be sure you understand how any new recommendations relate to your specific financial goals.
Rather than waiting to see whether your advisor’s firm may be sold, plan ahead by asking about the firm’s ownership structure and long-term succession plans. Generally, if ownership is spread across a diverse set of employees, it’s far less likely that the firm will be sold suddenly to secure a golden nest egg for a small number of aging owners.
You Lose Time Acting as the “Go Between,” Connecting Multiple Financial Professionals
Are you frustrated by shuttling papers back and forth and forwarding e-mails between your advisor, your attorney, and your accountant? When tax time rolls around, are you struggling to remember why your advisor recommended a particular capital gains strategy?
If you’re spending considerable time managing your financial life, something isn’t working. Perhaps your advisor doesn’t offer the level of service you require, or maybe the firm is ill-equipped to keep track of your particular situation.
Working with an advisor that offers more comprehensive services can save you time, headaches, and money. At Truepoint, we offer a coordinated suite of financial services, including investment management, tax planning and preparation, and estate planning. Our teams of specialists work together to coordinate a holistic plan for each client. Plus, because these services are typically included in our fee, clients don’t need to worry about the accumulated costs of consulting additional professionals.
Your Advisor’s Business Structure is Questionable
Your advisor should be a fiduciary—a professional who must offer advice that is in your best interest. If your advisor gets a cut every time they recommend a particular product, their advice may be more likely to benefit their bottom line than yours.
You should also understand who serves as the custodian of your assets. That’s the entity that holds your assets and issues your account statements. If your advisor has custody of your assets, this leaves you vulnerable to ethical abuses. In addition, you should be concerned if the custodian is a small company you’ve never heard of. Typically, custodians are big brand names that have a long history and handle a significant amount of assets—Fidelity, Charles Schwab or TD Ameritrade, for example.
Finally, learn about the ownership structure of your advisor’s company. Many advisors tout their “local” status when in fact they are a satellite location for a larger, national chain. Find out whether your advisor makes their own investment decisions and financial plans or if they follow templates distributed by a parent company.
You Don’t Fully Trust Your Advisor
If you have any reservations about trusting your advisor, you should reconsider the relationship immediately. Wealth management is, at heart, a client relationship business. Your advisor should make you feel comfortable and confident. If you find yourself trying to ignore nagging doubts, or if you’re unclear about the rationale behind your advisor’s recommendations, then you should make a change.
Occasionally, one partner in a couple feels good about their advisor while the other partner is uneasy—or even feels ignored. (This may explain why approximately 70% of widows fire their financial advisor upon their husband’s death.) An advisor should build strong relationships with both members of a couple—or all members of a family. If your spouse or a family member expresses reservations, it’s time to reconsider. Your financial health is too important—and there are simply too many alternatives available—for you to remain in a relationship that feels “off.”
And you may want to consider the make-up of the organization as well. For example, you might prefer working with a firm that is broadly diversified by age and gender, including across advisor and leadership roles.
Your Personal Situation Changes
When you go through significant life changes, it may be prudent to re-evaluate the fit of your financial advisor. Many people begin working with an advisor when their needs are relatively simple and straightforward, but over time, their lives become more complex as wealth accumulates. You may want to opt for an advisor who can provide more sophisticated and comprehensive services.
Regardless of your phase of life, your advisor should have a thorough understanding of your particular situation, as well as your unique goals. They should instill confidence that you are on target to achieve what’s most important to you—and they should encourage you when you get off track. Increasing your account balances isn’t the only—or even the primary—objective. A good advisor will provide you peace of mind so you can use your wealth to build the life you’ve always wanted.