If you’re thinking the grass might be greener with another financial advisor, you’re not alone. A recent YCharts survey shows a sizeable percentage of investors changed their advisory relationship in 2023. Switching can be beneficial, but sometimes it serves no purpose and does more harm than good.
How do you know whether to maintain the status quo or cut the cord? It will depend, in part, on the situation you’re in. Here, for example, are five times when considering a change may be appropriate.
1. You’re about to retire, and your financial objectives are shifting from growth to income.
Sometimes, a financial advisor who’s skilled at building wealth doesn’t have deep expertise in preserving it and generating retirement income. Few financial advisors are specialists in meeting both growth and income objectives. They tend to have one strength or the other.
If your advisory relationship has centered on accumulating wealth as quickly as possible, you may need a different advisor as you approach or enter retirement. This is the time to build a relationship with a professional whose focus is a.) building retirement income strategies, and b.) helping clients navigate the emotions associated with a shift in life focus and attitudes toward money.
2. You’ve come into money from an inheritance or a smart business move.
Managing large sums of money requires a level of professional advice and experience that your current advisor may not have if their practice centers on simple portfolio management for clients of average means.
If you inherit wealth or become wealthy from selling a business or a piece of real estate, you’ll need holistic financial planning services that include sophisticated portfolio management techniques, and tax and estate planning advice. These services may be available from other professionals within your advisor’s current firm. If so, be sure to explore this option before you look elsewhere.
3. You want to dialogue differently.
Do you want to be deeply involved in the financial decision-making process or would you prefer a “just tell me what to do” approach? Different advisors dialogue differently and generally have one style or the other.
If your desire to participate in decision-making morphs into a more passive approach – or vice versa – it could be time to find a different relationship.
4. You’re getting divorced.
Many times, changing financial advisors can be the right thing to do if your spouse was handling the money. You need an advisor who’s loyal to you. If you were the primary contact and built a close relationship with the advisor, let your spouse seek another source of advice.
5. Your spouse has died.
Be careful with this one. It’s best not to change advisors too quickly after a spouse dies, as there are many other changes to contend with. It makes sense to have an initial meeting with your current financial advisor, make sure short-term needs are met, and make plans to assess the relationship in six months. If the advisor dealt primarily with your spouse, you might find the fit isn’t right and you don’t have a good rapport. In this case, interview other advisors until you find one you can relate to and respect.
Some situations don’t warrant a change in advisors. Here are two common ones.
1. You’re dissatisfied with your investment performance.
Many people cite poor investment performance as their primary reason for changing advisors. Scratch the surface and you’ll find it’s probably not the real reason but merely one that’s readily available. Typically, there’s an underlying problem such as lack of service or empathy, poor communication, one spouse being ignored, or something else. Disappointing performance may be a valid issue, but many times “blaming” performance is really a red flag indicating deeper problems in the relationship. In my opinion, it’s best to focus first on the performance of the relationship. Fix that, and there’s a chance it will end the dissatisfaction with rates of return. There is only so much return to capture from different financial assets. Get the relationship right and be direct. Your advisor will appreciate it.
2. You seem to be paying too much in fees.
For a younger person who doesn’t need much in the way of financial advice, paying high fees is unnecessary and hinders asset growth. In such cases, just buying index funds may be the way to go. As we age, however, advisory fees pay for a deeper relationship that provides lifestyle counsel, assistance with emotional navigation in volatile markets, and greater peace of mind. It’s difficult to put a price tag on these things.
Remember the adage, “You get what you pay for.”? If you need heart surgery or are in legal trouble, chances are you’re not going to search for the cheapest surgeon or lawyer. The same holds true for financial professionals.
Unlike marriage, relationships with financial advisors aren’t “until death do us part”. You’re free to seek financial advice from different professionals at different stages of your life. When you’re ready to make a switch, be sure to take your time and interview a variety of candidates until you find the best fit for your needs.
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