While some people in the retirement-planning stages worry about outliving their money, others have a different concern: that their money is outgrowing their investment advisor.
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It’s not unusual for the size of the client’s investment to increase well beyond their advisor’s level of experience and knowledge. Higher net-worth individuals often demand more creative, sophisticated planning for their needs than their original advisor is able to provide.
“Many affluent clients have graduated from their advisor’s capabilities, but are still working with someone who cannot handle their larger financial needs,” says Eric Kearney (www.erickearneyadvisor.com), an investment advisor for Retirement Wealth. “This can be costly, both in terms of investment potential and time wasted, so the client has to pay attention and know when it’s time to change advisors.”
Kearney lists three signs that your money has outgrown your advisor:
- Outdated portfolio. Kearney says a typical scenario sees someone continually growing their net worth, then later realizing that their portfolio never really changes. “The advisor is using the same approach over and over again,” Kearney says. “So by the time the client explores a second opinion, they can see they should have graduated from this very simple portfolio hundreds of thousands of dollars ago. That’s usually when they realize they’re in a fee-ridden portfolio. Therefore, it’s important that you know how your advisor is getting paid and whether that structure gives them the incentive to do a good job.”
- Unaware of all the options. Many investors aren’t aware of their full range of options, Kearney says, adding that their advisors often aren’t either. “If you’re never offered any new ideas or strategies, such as lowering your taxes, reducing your mortgage payment or a long-term care alternative, that means your current advisor is probably stale, and they’re not interested in offering you proactive type service,” Kearney says. “There’s no one-size-fits-all investment advisor when they can come from different fields – CPA’s, insurance agents, financial planners and attorneys. Each has different areas of focus. You should ask your advisor, ‘What are your capabilities outside of traditional asset allocation?’ ”
- Lack of systems, communication. Wealthier clients with multiple financial pieces in motion notice when advisor contact is inconsistent. “There are a lot of people, even with multi-million dollar accounts, who think, ‘Maybe my account is just not big enough for my advisor to pay attention to me,’ ” Kearney says. “That’s usually not true. It’s just a matter of the advisor not having the right systems in place. It’s important to for an advisor to have a team with a point-of-contact person whom the investor can reach any time.”
“There comes a point when you know you’ve outgrown your advisor, but you don’t want that to be too far down the road,” Kearney says. “Before they get an advisor, or when looking for a new one, I think people really have to ask them, ‘Who is your typical client? Do you match my needs? Do you deal with a certain range of net worth and have minimums?’ People want to know if they’re working with an advisor that really understands them.”
About Eric Kearney
Eric Kearney (www.erickearneyadvisor.com) of Retirement Wealth, with Florida offices in Cape Coral, Punta Gorda and Bonita Springs, has been helping clients reach and maintain their financial goals for more than 16 years. Eric co-authored a book with Forbes Media Chairman/Editor-in-Chief Steve Forbes, Successonomics. His professional licenses include a Series 65, Series 7 Securities License and a Life and Health Insurance License. He teaches pre- and post-retirees a wealth management course titled “Rejuvenate Your Retirement” at Florida SouthWestern State College and Florida Gulf Coast University.
Investment Advisory Services offered through Retirement Wealth Advisors, (RWA) a Registered Investment Advisor. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.
FAQs
There are several warning signs that your financial advisor may be ripping you off, including high fees, hidden costs, and a lack of transparency. If you have concerns, it's important to speak up and ask questions.
How do you know if your financial advisor is bad? ›
But as helpful as they can be, there are some legitimate reasons you should bid your adviser adieu.
- Your adviser is non-responsive or doesn't listen. ...
- They're not a fiduciary. ...
- There's ambiguity in their compensation structure. ...
- Their performance is poor. ...
- They charge too much. ...
- They're unable to give you the advice you need.
There are several warning signs that your financial advisor may be ripping you off, including high fees, hidden costs, and a lack of transparency. If you have concerns, it's important to speak up and ask questions.
What happens if a financial advisor loses you money? ›
Your investment advisor or broker should have discussed your goals and risk tolerance with you before investing any of your money. If they recommended riskier investments than were appropriate for you and you lost money, you may have a claim. If your losses were substantial, there is no time to waste.
When should you leave your financial advisor? ›
Poor performance, high fees, strained communication and stagnant advice are among the reasons to look for a new advisor. Kevin Voigt is a freelance writer covering personal loans and investing topics for NerdWallet.
How to tell if your financial adviser is doing a good job? ›
Here are five steps you can take to gauge your financial advisor's performance:
- Step 1: Evaluate the performance of your investment portfolio. ...
- Step 2: See if the financial advisor conducts an annual tax review. ...
- Step 3: Check if the advisor is aligned to your risk appetite. ...
- Step 4: Ensure your financial advisor listens.
Financial advisors and insurance agents may have a certain reputation in many circles. While I believe the majority are honest, some advisors may give the rest a bad name by focusing on the commission instead of the client. And, even if you meet an honest advisor, how can you know they will do the job suited for you?
What financial advisors don't want you to know? ›
10 Things Your Financial Advisor Should Not Tell You
- "I offer a guaranteed rate of return."
- "Performance is the only thing that matters."
- "This investment product is risk-free. ...
- "Don't worry about how you're invested. ...
- "I know my pay structure is confusing; just trust me that it's fair."
In most cases, you simply have to send a signed letter to your advisor to terminate the contract. In some instances, you may have to pay a termination fee.
Why should I fire my financial advisor? ›
If your financial advisor isn't paying enough attention to you, isn't listening to you, or is confusing you, it may be time to call it quits and find one willing to go the extra mile to work with you, serve your best interests and to keep you as a client. Morningstar. "Why Do Investors Fire Their Financial Advisors?"
For example, you can complain to the Financial Services Ombudsman and may be able to claim compensation if things go wrong. If a financial adviser is not registered with the FCA, you can make a complaint to the FCA. Don't be afraid to ask an adviser about their qualifications and Statement of Professional Standing.
Am I wasting money on a financial advisor? ›
If, however, you have some money you want to invest, maybe you run a business, or you come into an inheritance, a financial advisor is a good idea to help you navigate financial decisions. Their time might seem expensive, but consider the time you would need to spend to learn as much as they know.
Do financial advisors see your bank account? ›
It is risky to give your bank account login ID or password to a financial advisor or anybody else. Note that your advisor might be able to see your checking account and routing (ABA) numbers when you establish online transfers.
What do you say when leaving a financial advisor? ›
Be polite and respectful. Hear your financial adviser out. But if you've firmly made up your mind, just explain that you really do appreciate the work they've done for you in the past, but your mind is made up: it's time for you to go now.
How do you end a relationship with a financial advisor? ›
You can either call or email your advisor - but letting them know you're leaving and why is a nice thing to do. Your new advisor will actually do all the work of transitioning the accounts for you. A simple email like this would work great...
How difficult is it to change financial advisor? ›
If you've been working with somebody who only provides advice, the process is generally quite easy. Notify your advisor that you'd like to end the engagement, and begin working with your new advisor.
How do you know if a financial advisor is any good? ›
All financial advisers should be registered with the FCA. This means they meet the right standards and you get more protection if you're not happy with the service. For example, you can complain to the Financial Services Ombudsman and may be able to claim compensation if things go wrong.
What to do if you are unhappy with your financial advisor? ›
In most cases, you simply have to send a signed letter to your advisor to terminate the contract. In some instances, you may have to pay a termination fee.
How often do financial advisors fail? ›
80-90% of financial advisors fail and close their firm within the first three years of business. This means only 10-20% of financial advisors are ultimately successful.
How do I know when to change my financial advisor? ›
Common signs that indicate you should switch advisors include a lack of communication, misalignment with your financial goals, poor performance, and a lack of personalized advice.
