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In an ideal world, you’d find the right person to manage your money the first time around. But in reality, that doesn’t always happen. Yet many people are hesitant about firing their financial adviser — just 6% of investors ever end things, CNBC reported, per a Morningstar study.
The process of parting ways may not feel pleasant, but there’s no reason to stick around in a relationship that’s not serving you, especially when your financial future is at stake. Here are four signs it’s time to fire your financial adviser.
1. Your adviser isn’t a fiduciaryWhen a financial adviser is a fiduciary, that means they’re “legally obligated to act in your best interest,” according to Kiplinger. This designation is essential to feeling secure that an adviser is putting your financial goals ahead of their own bottom line.
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You can (and should) ask your adviser outright if they are a fiduciary. But if you’re feeling uncertain, red flags to look out for include questions about your adviser’s motives or if your adviser “has primarily sold you products (annuities and life insurance),” explained Kiplinger. You can also clarify your adviser’s status as a fiduciary by learning how they get paid, specifically if they earn commissions when you buy certain products, suggested Bobbi Rebell, certified financial planner and author of Launching Financial Grownups, in an interview with MarketWatch.
2. Your adviser is overcharging youAs Investopedia put it, “one of the quickest ways to see your returns diminish is to pay too much for fees and expenses.” While you will have to pay something for an adviser’s expertise, it’s important to pay attention to what you’re receiving for the amount you’re paying. “If they’re charging 1% [a year] and all they’re doing is portfolio management, that should raise some red flags,” Micah Hauptman, director of investor protection at the Consumer Federation of America, said in an interview with CNBC.
Beyond the fees you pay directly to the adviser, also take note of whether they’re “steering you toward investments with a hefty commission” or if you’re “paying an excessive amount for a fund when there is a similar investment available for less,” Investopedia suggested. You can suss this out by reviewing your monthly or quarterly statement. From there, ask your adviser if they can “rectify the situation or there isn’t a good reason why the expenses are so high” — otherwise, “it’s a sign you may need to fire your financial adviser,” per Investopedia.
3. Your adviser isn’t good at communicatingCommunication can make or break a relationship, and your relationship with a financial adviser is no exception. Ideally, your adviser should not only be able to explain what they’re doing with your money in plain English, they should also listen when you talk. As Derieck Hodges, certified financial planner at Anchor Pointe Wealth Management, told MarketWatch, an adviser “should have a great understanding of the client’s goals and develop strategies aligned with those goals.”
It’s also a problem if your adviser isn’t good at staying in contact or following through in a timely manner. “If your adviser doesn’t take your calls, responds slowly or doesn’t address your questions, that should not be tolerated,” Hodges told the outlet.
4.Your adviser isn’t able to provide what you needYou might also consider saying goodbye to your adviser if they simply can’t give you what you’re looking for. Maybe they’re outsourcing you to a CPA to talk about tax-related questions, or they’re not equipped to handle your required level of estate planning or wealth management support. Or perhaps you realize you have the knowledge and time to DIY what your adviser is doing for you.
And while your portfolio realistically won’t always be on the up and up, it’s also fair to reach a point where you’re dissatisfied with your portfolio’s performance under your adviser’s management. “Markets and investments are going to have down periods and you should expect that to happen sometimes but if over 5 years, you aren’t making progress, that’s a problem,” Tara Unverzagt, a certified financial planner at South Bay Financial Partners, told MarketWatch.