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3 Ways to Replace Your Financial Advisor (VIDEO)

By Justin Pritchard January 02, 2022 Managing Money

While it can feel intimidating to end a relationship, it’s critical to get the help you deserve. Plus, moving on to another chapter doesn’t necessarily mean that you dislike your advisor or that anybody is a bad person. 

Sometimes a financial planner helps you accomplish things, and sometimes they can’t offer additional value. Eventually, it’s time to part ways, whether it’s a happy ending or you’re moving away from a bad situation.

And we’ve all heard stories about the worst advisors: They might ruin their credibility by ignoring one partner in a couple, failing to respond to questions, or being dishonest.

So, if it’s time to break up with your financial advisor, you have several options:

  1. Manage your funds yourself.
  2. Hire a financial planner for one-time guidance (and then DIY).
  3. Find the right advisor for ongoing service.

Managing Your Own Money

If your needs are relatively straightforward, consider the do-it-yourself (DIY) route. That’s especially possible when you have few complications in your financial life. Whether you DIY or hire somebody, you still need a basic understanding of how everything works. After all, it’s your money and your life.

You can research financial planning topics and get a solid education from various sources. Whether you spend time in discussion groups or you prefer to read books, your efforts should gradually improve your knowledge. One book that covers a lot of ground without overcomplicating things is The One-Page Financial Plan by Carl Richards.

Getting One-Time Advice

If you don’t want to take everything on yourself, you can often get help without signing on with an advisor for the long term. For example, some financial planners offer hourly services or one-time financial advice for specific projects. If you just want somebody to review numbers with you and see if you’re on track to fund a comfortable retirement, that might be an excellent approach.

When getting advice under a project-based engagement, you don’t have to hand over all of your assets for the advisor to manage. That means you take less risk. Plus, if it turns out that the advisor is unhelpful (or just operates on a different wavelength), you can easily walk away. There’s no need to transfer assets or unwind a complicated relationship because you both know it’s a temporary thing. 

There’s significantly less risk that an advisor can steal your money if you don’t let them manage it. You can often keep your account numbers private and simply provide the essential information needed to get the answers you want. And you don’t need to write a check for what might turn out to be a Ponzi scheme. 

All that said, if you like and trust the person you’re working with, you might be able to continue on together (making this an excellent way to learn more about an advisor while you get vital information about your finances).

Finding a New Advisor

Some people prefer not to manage their money. Whether you find it boring or complicated – or you don’t have the time – you can probably find a better fit if you’re currently unhappy.

If you decide to make a change, do your best to find somebody you can work with over the long term. Switching advisors takes time and energy (and it might even cost money), so it’s best to do this as little as possible.

Questions to Ask

Start by asking lots of questions before signing on with a financial advisor. Learn about their worldview, how they serve clients, how much they charge, and more. It may help to know if they focus on particular topics (like retirement planning or estate planning) and review any education, professional designations, and media mentions that back up their claims.

It’s also smart to ask if the advisor is legally required to put your interests first – as a fiduciary – or if they’re in a sales role to help you buy products. Sixty and Me has covered the concept of fiduciary advisors extensively, and this interview with Margaret Manning and Pam Kreuger is an excellent refresher on why it’s so important.

Be Mindful of Costs

Don’t ignore switching costs as you evaluate the costs of working with a new advisor. For example, you might face termination fees, commissions, account closing costs, and other expenses when you break ties with your current providers. 

In some cases, you can avoid those costs with a well-designed exit strategy, so don’t assume you’ll always have to pay full price. For example, if you transfer assets in-kind (instead of having a broker sell everything), you might save some money. Alternatively, you might be able to strategically wait out surrender charges from an annuity, assuming it makes sense to do so.

Making the Call

Do you owe an advisor an explanation if you’re leaving? Not necessarily. Especially if you’re leaving because of poor service, trust issues, or unmet (and unaddressed) expectations, you should feel free to go without any communication. In many cases, your next investment provider can give you a form to transfer assets with no involvement needed from your (soon-to-be) former advisor.

You don’t need anybody’s permission to do what’s best for you. If you’re feeling a sense of dread about discussing your needs, that’s a sign that a change may be in order. That said, if you have a decent relationship with the advisor, they will undoubtedly appreciate hearing from you. Any advisor with class will thank you for the heads up and wish you the best in your next chapter.

Do you trust your financial advisor? Why or why not? Have you considered shopping around? What about DIY financial planning? Do you think you need some more knowledge to start planning your finances on your own?

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The Author

Justin Pritchard, CFP®, is a fee-only financial advisor who helps clients get clarity on retirement. He has been quoted in The New York Times, Consumer Reports, The Wall Street Journal, and more. Improve your retirement readiness with Justin’s resources for retirement success, available at no charge from ApproachFP.com.

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