Fire Your Financial Advisor

12 Reasons to Fire Your Financial Advisor – Part 1

Not all financial advisors are created equal. In some cases, you may hire an advisor only to find out that he or she isn’t capable of giving you the level of service you need. Since the future of your investments (especially your retirement portfolio) lies in the hands of your financial advisor, it’s important to do your homework, check your statements, and monitor the advisor’s activity to ensure that you are working with one who has your best interests at heart.

We will present our discussion in 2 parts… Here is Part I:

1. Not Achieving Your Goals

If your financial advisor hasn’t consistently delivered the results you need, it’s time to look for a new one. Make sure your goals are realistic and agreed to by your financial advisor. Performance that does not subsequently meet your expectations is one of the most serious warning signs that you may have a bad financial advisor, and it should never be ignored.  

Our InvestBetterSpendSmarter.com (IBSS) blog site offers some free investment tools (My Optimal Asset Allocation Analyzer and TSOA Freedom Portfolio Models) that will help you to know the right issues and questions to discuss with your advisor concerning your goals.

2. High Costs

Every financial advisor will charge you for the services you receive, but high costs of financial advisors can cut into your gains significantly. Depending on the advisor’s products or services, costs range from ¼% to over 5% of the assets under management per year. Don’t be afraid to ask how your advisor’s costs compare with competitors. He or she should know. If your financial advisor is charging more than the competitors, it may be wise to look for a new one, especially if the advisor is unable to justify the higher expense.

3. Costs are Not Transparent

If your advisor refuses to or is unable to tell you the true cost of services or products, it is time to leave. “True costs” are all costs that are charged to you directly or indirectly, including any contingent or opportunity costs. An advisor should be willing to completely disclose all the costs of his or her services and/or products.

4. Use of Intimidation Tactics

If your financial advisor is talking more than listening, this could be a warning sign that he or she doesn’t have YOUR best interests at heart. Is there a particular product or mutual fund that your financial advisor is “pushing”? Some financial advisors will try to “scare” you into making the decisions that benefit them most by making you believe you have no other option or will miss out on something really important. An extra incentive to get you to sign now is a “baiting” tactic often used. These are all red flags you should pay attention to. Don’t stay with an advisor who engages in this behavior. In fact, we believe it is best to look for financial advisors who are independent, not tied to selling only certain products or specific brands of services.

5. Unavailable to Answer Questions

If you have questions or concerns about your portfolio, your financial advisor should always be available to answer them. The market is constantly moving. If you find yourself waiting days for a response from your advisor, it may be time to search for a new one.

6. Lack of Qualifications – Training and Certification

(Note: We will cover “Qualifications – Experience” in the next post.)

Check the advisor’s qualifications. A good financial advisor will be able to produce evidence of relevant education/training as well as licensure and certification.  An advisor may have the following designations by his or her name: Certified Financial Planner (CFP), Registered Investment Advisor (RIA – See “Special Note” below), Chartered Life Underwriter (CLU), or more. However, keep in mind that a so-called “professional certification” does not mean that an advisor is truly qualified to deal with your issues. Those titles mean they passed some tests, not that they are experts. Ask yourself, “Can I trust this person with my life savings?” If you find out that your answer is “no,” take your business elsewhere.

Special Note: Be especially wary of anyone who uses RIA (Registered Investment Advisor) as a professional designation in any advertising. It is specifically prohibited by the U.S. Securities and Exchange Commission because it is false and misleading. An RIA only means that a person passed a test about regulations (not about investment strategies) and has filled out the required forms to register as an investment advisor with the government. Nothing more. You should avoid an advisor who presents the illusion that his/her RIA means anything more than plain registration.

What’s Next…

This list of 6 reasons to fire your financial advisor gives you some things to consider. Stay tuned for Part 2 of this series, which will provide 6 more reasons. (Register for a free subscription on any page for notification of our new posts.)

In closing, let me leave you with a humorous quote with further food for thought…

“If you are driving a Honda and your financial advisor is driving a Mercedes, there is something wrong!”   Jim Tso, October 2013


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curator

Jim Tso wants to “give back” and share his 35+ years of successful personal money management experience to help others to achieve their financial goals. Jim created this InvestBetterSpendSmarter blog (IBSS) to provide you with free investing, planning, savings, retirement, and inspirational tips derived from his unique, innovative, and proven approaches to money management. He welcomes and appreciates your feedback.

Jim would also appreciate it if you would kindly share our IBSS website and blogs with your family, friends, and business associates. Thank you!

Comment

  1. Gary Warren January 2, 2014 at 2:34 pm -

    If I want to learn to manage my own money in 2014, which article on your blog should I read first?

    • curator January 4, 2014 at 11:27 am

      Thank you for your great question! We suggest that you start with this blog post about the “My Optimal Allocation Analyzer” tool (or MOAAA for short). Go ahead and answer the questions in the tool to determine your risk tolerance and risk preference. The MOAAA tool scoring key will provide links to the optimal allocation for you (or allocations, if you have different accounts). Please let us know if you have any questions or comments after you have read the blogs/articles.

  2. http://network.nature.com/profile/U1A8607BC December 8, 2013 at 4:34 pm -

    Heya i am for the first time here. I came across this
    board and I find It really useful & it helped me out a lot.

    I hope to give something back and help others
    like you helped me.

  3. […] financial advisors deal with some conflicts of interests. In the Part 1 of this series we wrote about finding independent financial advisors. Often financial advisors are […]

  4. JOhn Thompson November 5, 2013 at 12:51 pm -

    An SEC registered RIA is a lot more then someone who passed a test, you must prove that you have the capital to operate and must have a minimum of $100,000,000 of assets under management. I take offense that you think anyone who states they are acting as a RIA is not someone you should work with for retirement planning. The people they should avoid are UNLICENSED people like this site which is violating securities law by giving advice without knowing anything about the person reading on the other end. Good Luck with the SEC.

    • curator November 5, 2013 at 2:32 pm

      Our point is that some financial advisors misuse “RIA” as a professional designation. The SEC has made it very clear that any use of RIA as a professional designation (i.e., in letterhead, business cards, mailings, etc.) is misleading and violates securities laws. Investors should question any advisor who willingly misleads clients (current or future) in this way, because it goes to the heart of the advisor’s integrity and trustworthiness. Are you offended by our position because you are using RIA as a professional designation? If you are, I urge you to review this with your SEC-expert lawyer. [Check this “false and misleading” link from the blog post.] As a publisher, we are not required to be licensed because we are not giving specific advice to anyone, just general helpful information to the public.

  5. Joe Baker November 4, 2013 at 8:59 pm -

    All the financial planners, and all of us citizen investors out here on main street, are simply for show to provide cover for the traders who are raking our money off the table and into their coffers on wall street.

    • curator November 6, 2013 at 10:53 pm

      Your disappointment with our government and Wall Street is understandable. People have suffered the bad effects of too many bubbles and bad policies generated by both. However, the investment track record is still positive if you adopt and adhere to tried-and-true long-term investing strategies. Please read “The Power of Persistence” blog, which is a true story that illustrates the proven result of staying the course, even through all the bad times caused by our government and financial leaders. We hope you can learn from our blog to take charge of your own financial future.

  6. Rudyard Tull November 1, 2013 at 9:30 am -

    Speak to me or any world financial group financial planner.we have our
    Clients best interest at heart.rudy

    • curator November 4, 2013 at 10:25 am

      Please tell us how you serve your clients in an objective and independent way with low costs.

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