The job of a financial advisor is to provide clients with advice and guidance on the best way to manage their investments. This help can be invaluable when building wealth or planning your estate. Choosing an advisor whose financial philosophy aligns with your own is an important step in ensuring that you’re able to work well together, but that doesn’t eliminate the possibility that things could go south. There are several reasons why a financial advisor might decide to move on. Knowing what they are can help you keep the relationship on solid ground.
1. You Opt Out of All Decision-Making
While financial advisors provide expert insight into things like how to maximize your portfolio’s tax efficiency and which 529 plan is the best if you’re saving for your child’s college education, they’re not interested in assuming complete control over your finances. Part of what working with a professional advisor entails is telling him or her what your financial goals are and what strategies you are or aren’t comfortable with. Your job is making decisions based on his or her recommendations.
Handing over full control without offering any input regarding what you want can lead to frustration on the advisor’s part because he has no way of knowing whether he’s getting it right. If your advisor chooses an investment for you that ends up underperforming, for example, and you complain about it, he may decide that the fees he is earning from your account aren’t worth the headaches.
2. You Ask the Wrong Questions
Asking questions is part of assisting your advisor in coming up with the best financial plan possible, but there are some things she likely doesn’t want to hear. Asking her to put a specific number on the return an investment will generate, for instance, is a waste of time because it’s impossible to predict with pinpoint accuracy.
It’s also bad form to question financial advisors about investments held by their other clients. This is a violation of confidentiality and it can land them in hot water, particularly if they’re a fiduciary. Fiduciaries have certain legal and ethical responsibilities to act in the best interests of their clients. Revealing someone's personal financial details to a third party without his or her consent is a major no-no under the Investment Advisers Act of 1940. (For more on fiduciaries, see Choosing a Financial Advisor: Suitability vs. Fiduciary Standards.)
3. You’re Too Needy
Financial advisors typically don’t just deal with one client. Instead, they spread their time among multiple clients who need varying degrees of assistance with managing their assets. While an advisor’s role is to answer your questions or address concerns in a timely manner, it’s not realistic to expect one to be constantly at your beck and call.
If you’re checking in on a daily basis to see how the latest mutual fund you’ve invested in is doing – or you’re phoning 10 times a day to ask mundane questions – you may find your calls are returned less frequently. Your best bet when it comes to asking questions? Limit your queries to things that pertain only to your account and do your research beforehand so that you’re able to communicate more clearly what you need to know. (To learn more about which questions you should be asking, read Essential Questions for a Financial Advisor.)
4. Your Account Isn’t Generating Enough Revenue
Financial advisors expect to be paid for their efforts and their fee structure may have an impact on whether they decide to keep you as a client. A fee-only advisor charges you based on the services provided; an advisor who earns a commission gets paid when he or she sells specific financial products. Fee-only advisors may assess an hourly rate or a flat fee – or they may charge you a percentage of the assets they’re helping you to manage. (See also Fee-Only Financial Advisors: What You Need to Know and Paying Your Investment Advisor – Fees or Commission?)
If your advisor feels that your account isn’t bringing in enough in fees to justify the time and effort he is putting into managing it, that may spell doom for your tenure as a client. A good way to feel out a potential advisor is by asking broad questions about what a typical client is like, with no specifics. This can give you an idea of what kind of assets the advisor is used to managing and whether the size of your portfolio is a good fit.
The Bottom Line
Being dumped by your financial advisor may not be pleasant, but it can be eye-opening. If your advisor gives you the axe, don’t spend too much time asking why. Instead, focus on finding a new advisor who is more in tune with where you are financially.
You also might find this tutorial helpful: Become Your Own Financial Advisor.