There are several attributes people look for in their financial adviser. Are your needs being met? If not, then you have every right to re-evaluate the relationship and switch financial advisers.
There are practical factors involved in switching advisers, but these are surmountable. Relationships are built on years of trust and loyalty. The main barrier people mention when transferring advisers is an emotional one.
Figure out what is not working and what you would look for in a new firm. Let your current firm have the chance to remedy things. Perhaps they don’t know how you feel or what you want from them. Don’t leave any improvements open-ended, though.
There are many legitimate reasons for leaving your financial adviser. Getting the reasons straight in your head will clarify why you’re leaving and what you’re looking for.
Honesty is the best policy. Here are some reasons why people seek help from a financial adviser. They will help you to put your motivations into words.
Did you hire your financial planner for market-beating performance? If yes, there’s a good chance you’ll sack them for the same reason. Nobody knows what the future will bring.
What does good performance really mean? Beating the market or a benchmark? Or attaining the returns necessary to meet your lifetime goals?
What is the greatest value a financial adviser can bring? The expertise to guide you through the emotional challenges of investing while maintaining the discipline necessary to make tough decisions. Is your current adviser helping to talk you off the ledge when greed, fear or panic kick in?
If they are providing reasonable returns for the risk taken, the long-term emotional support is more valuable. If your financial adviser is not doing this for you, then this is a good reason for looking elsewhere.
Financial advisers are hired to provide a service you are unable to perform yourself. As service providers, simple matters like returning phone calls and responding to emails should be a given.
This does not mean an instant response or immediate solution (which we tend to expect these days). However, there should be a prompt acknowledgement, reassurance the matter will be investigated and an estimated timescale of when to expect an answer.
This sounds simple but can be lacking in financial services. If you feel let down on this front, it is another valid reason for switching.
3. Financial planning
Financial services are about selling products. Hot investment funds or stand-alone pensions, for example. In times of uncertainty, you have no idea how these products fit nor how close you are to living the life you want.
Has your adviser built you a personal financial plan? Have they taken the time to get to know you? Do they have a clear grasp of what you are looking to achieve with your money?
With a long-term financial plan, it is easier to ride out short-term market disruption and keep your eye on whether you are on track to achieve your goals. Does your adviser provide you with this level of peace of mind?
Financial planning software is very refined – allowing your adviser to build in present and projected assets, income sources and expenditure items. Seeing some ‘red’ creep into your plan serves as a useful nudge to save more now, delay a goal or reduce future expectations. Being reassured that you have ‘enough’ can be life-changing.
If your adviser is unable to provide this level of support, then you are justified in using this as a reason for switching.
4. Rebalancing and reallocation
Part of delivering your financial plan is incorporating a set of guiding principles: simple actions which help keep you on track. Nobody can predict the future, but there are tools to help manage risk during volatile times.
Take the common investment portfolio proxy of 60/40. 60% is invested in successful global companies and 40% is invested in government gilts and fixed interest. The 60% is to produce growth and the 40% is there as a volatility shock-absorber.
Over time the allocation may drift to 70/30 due to strong economic performance. You are invested in a portfolio which could be more volatile than you would be comfortable with.
Your adviser should not be making constant and needless changes. If, as part of your annual planning, you sell from the assets that have done well (sell high) and buy into the assets which have not done so well (buy low) you can maintain the correct risk allocation.
If you feel like your portfolio is being ignored and allowed to drift, this is a sign that your adviser is letting you down, providing you with further ammunition for switching.
5. Salesperson or fiduciary
Salespeople can tap into our natural ‘greed’ in times of high returns and ‘fear’ during times of market uncertainty, offering either good returns or safe-haven products depending on where we are in the market cycle.
You and your needs may not be the main driver behind the selling of these solutions. For example, if your adviser benefits financially each time you buy something new, you need to stop and ask, “Is this recommendation really the best thing for me right now?”
Moving to an adviser who is fee-based is a straightforward way of eliminating this bias. In this increasingly popular scenario, the adviser works for you and not your money and can make impartial decisions in terms of what is best for you.
Most advisers have had to move from the old commission-based model. However, it is still common to find advisers who get paid based on the amount they invest for you. This does introduce conflicts of interest when the best option is to keep money in cash, pay off debt or make substantial gifts to your children.
If you are concerned about your adviser’s motives in recommending something, then this is arguably the most compelling case for switching. You may not be able to be this honest with them, but you deserve an impartial financial planner who puts your needs first.
Some practical steps
Don’t let your fear of confrontation prevent you from parting ways if it is the right thing for you and your future. Try not to let an awkward conversation stop you from doing what you need to do.
Check your contract or letter of engagement, which you would have signed when you appointed your adviser. This will verify any specific steps you have to take: i.e., give 30 days’ notice or send a formal letter of disengagement.
You don’t have to meet in person, but most advisers would appreciate a heads-up in the form of a phone call or an email. Separating on good terms helps make any future communication less awkward and provides useful feedback for their other clients.
If you would like some help in disengaging from your adviser, call one of our experienced financial planners today.