How to Break up With Your Financial Advisor

fortpitt in Wealth Management 10 June, 2024

Breaking up with a financial advisor can be daunting, but it is not uncommon for investors to need to take this step. Building wealth requires a healthy partnership with an industry professional who aligns with your financial needs. When these needs inevitably change, the best outcome starts by telling your financial advisor you are transferring your portfolio.

It is essential to periodically assess whether your current financial advisor delivers the services you need in the manner you want. If your needs change or you see that they are not providing services in an open, ethical manner — you know what to do. When it is time to sever the relationship, the process is surprisingly simple. Apart from finding a new, reliable advisor, there is little you need to do to facilitate the process.

Signs That It’s Time to Fire Your Financial Advisor

There are many reasons to change service providers, and it is worth noting that not all of these are negative. Sometimes, you need a different structure. Still, the first sign that it is time to find a new financial advisor is that your advisor’s investment approach or risk tolerance does not align with your goals. Some of the leading reasons investors choose to hire a new financial advisor include:

  • Lack of proactive communication: Lack of proactive engagement is based on your financial advisor failing to initiate communication regularly. It includes not providing updates on your portfolio’s performance or discussing strategic financial planning.
  • Expertise or service limitations: If your financial needs evolve to include estate planning, tax optimization, complex investment structures, or increased risk management, it may be time to find a service provider with broader capabilities.
  • Poor performance: Consistent investment underperformance compared to market benchmarks is a red flag. A good financial advisor can clearly explain performance and investment strategies.
  • High fees with minimal value: Paying premium fees and not receiving personalized advice, comprehensive financial planning, or tailored solutions does not indicate an adequate return on investment.
  • Conflicts of interest: It is vital that you have transparency and incentive alignment with your financial advisor. Identify conflicts of interest, such as recommending products or services that align more with the advisor’s interests than yours.
  • Lack of responsiveness: Poor communication, delayed responses, difficulty contacting your advisor, or inadequate explanations about your investments pose a risk to your financial well-being.
  • Limited technology or innovation: Access to analytics and other advanced financial tools, including online monitoring platforms and secure client portals, are essential to effective financial management.
  • Lack of personalized services: A financial advisor must understand your preferences, long-term goals, and unique circumstances. If their advice becomes too generic, start looking for a new financial advisor.
  • Compliance or regulatory issues: Concerns or indications of regulatory non-compliance, legal issues, or ethical breaches should prompt immediate consideration of change.

As you assess your current financial advisor and decide whether it’s time to make a change, ask yourself the following questions:

  • Are they helping you move toward your long and short-term financial goals?
  • Is their communication consistent, and do they help you understand your investment strategies?
  • Do their fees depend on your financial gains?
  • When was the last time they modified your portfolio to meet your wealth-building goals?

Alternatively, watch our webinar on when to hire or fire a financial advisor. We discuss the questions mentioned above in more detail, giving you the insight you need to make the right choice.

Steps to Switching Financial Advisors

Throughout this process, keep your communication clear and outline your expectations about the transfer of assets, account closure procedures, and other outstanding matters. It is also important to adhere to regulatory requirements, ensuring compliance with your legal obligations or industry standards as you transition to a new advisor.

Review Your Contract and Communication

Read your current contract, which should have a clause about terminating the service agreement and the accompanying fees. Some investment accounts may incur extra fees if they are exclusive to your current advisor’s firm or are locked down for a specific amount of time. Also, take note of the following in the fine print:

  • Early termination fees
  • Notice periods
  • Termination clauses

During this stage, to facilitate a smooth transition to a new firm or advisor, be sure to collect your investment records and additional collateral like the following:

  • Your investment portfolios
  • Account statements
  • Financial documents
  • Any relevant correspondence

Ensure you get access to your cost basis, or the original value of various assets with adjustments for dividends, stock splits, and return of capital distribution.

Review Your Contract and Communication

Find a New Advisor

Research and identify potential new advisors who better match your financial goals, service expectations, and risk tolerance. Part of this research is re-educating yourself about what you should expect from a reputable financial advisor. Schedule meetings or consultations with prospects to discuss your needs and expectations and assess how these advisors will align with them. During these meetings, ask the following questions:

  • What financial services do you offer?
  • What are your investment credentials, and how long have you been in this role?
  • What is your experience or focus?
  • What is your investment strategy or philosophy?
  • What is your service compensation structure?
  • How can you help me reach my long-term goals?
  • How often will you update me, and how can I communicate with you?

Notify Your Current Advisor

The last step is deciding how to tell your financial advisor you are transferring. Although it is not necessary to do so, it is good practice to notify them in person and on paper. Schedule a virtual or face-to-face meeting to discuss your decision and share your reasons for the cancellation, whether it is changes in financial goals, a mismatch in services, or the result of performance issues.

Your new advisor will take on transitioning your accounts through an automated customer account transfer service (ACATS), so your role in this process is simple — find a new advisor and notify your current one of the pending transition.

Trust Fort Pitt Capital Group With Your Wealth Management

It is essential to assess your financial goals and stance periodically. If your current advisor’s communication style, expertise, or services do not meet your needs, it is time to reconsider the relationship. Although it might be difficult, remember that this is business. Communication throughout the cancellation process is essential, as is staying engaged to ensure a seamless transfer of your assets and records. Be sure to continuously evaluate your new partnership’s effectiveness and alignment with your financial objectives.

Fort Pitt Capital Group is ready to offer you dynamic financial advisory services that evolve with your needs. Our skilled investment advisors have decades of experience in financial planning, investment analysis, and wealth management. You can look forward to consistent, reliable advice to help you better understand your portfolio while reaching your financial goals. Contact us today for more information on how we can take your portfolio to new heights or to schedule a free consultation.

Trust Fort Pitt Capital Group With Your Wealth Management

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