 | |  | |  | |  | |  | |  | |  |
| | | | | | | | | | | | |
1. You Feel Like a Little Fish in a Big Pond
Ever gotten that feeling that your Adviser could care less whether you stay with him or her? The reason may be simple;
your account is too small for them now. They may have treated you like royalty when you first became a client, but now
they barely return your phone calls. This is a very common phenomenon and it’s happening more and more as firms
continue to get consolidated.
Currently there are many investment companies, banks, and wealth management firms that are trying to divest
themselves of small brokerage accounts (less than $3 million) by either centralizing many of the relationship
management responsibilities or simply relinquishing the relationships. At $3 million, this is the point at which you as a
client are perceived to be "profitable" to a large firm.
So what should you do? For starters look for a company that not only provides the services you are looking for, but is
also happy to provide these services to clients with your portfolio size. Go to NAPFA (National Associations of Personal
Financial Advisers)and do a search for local and national Advisers. Ask the different companies what their average,
largest and smallest account size is. This will give you an indication of where you would stand as a client. Don't tell
them how much you have, as they may want to skew the numbers.
2. Your Adviser Has Limited or No Credentials
Credentials and degrees are not always a guarantee of professional competence, but they are a start. Just like you
would be hesitant to go to a Doctor that does not have a Medical Degree you should be hesitant of a Financial Adviser
that does not have the right credentials and experience.
What Should You Look For? The highest credential in the industry for a Financial Advisers is the CFP™ accreditation.
What this credential says is that your Adviser has studied and passed comprehensive exams on issues such as
investing, insurance, estate planning, retirement planning, taxes, and other pertinent issues relating to managing
wealth. This is not an easy exam to pass. It can take as long as a full year to complete all modules and become
accredited. A great thing about this credential is that the Adviser is not allowed to use the CFP™ mark even after they
have passed the comprehensive exam if they do not have at least 3 years of experience. In addition to this they also
have to adhere to high ethical standards and meet continuing education requirement to keep the designation. Click here
to see the full range of requirements.
So a CFP™ should be your minimum requirement. There are other designations out there such as CFA and ChFC.
There is certainly no shortage of acronyms in this industry. What you have to remember is not to be intimidated by the
arrangement of letters behind your Adviser’s name. Find out how easy or how hard it is to obtain these designations
and what these mean to you. A rule of thumb is, If you can obtain the designation by passing an exam that only takes a
week to study for it, you should discount it immediately. Otherwise you may end up with a salesperson, rather than a true
Financial Adviser.
Aside from a CFP™ or other credential you should still do more due diligence. Ask any new potential Adviser hard
questions about the economy, their investment style, investment philosophy, IRA rules, tax rules, etc. If they can’t answer
these types of questions, then it is likely that you are dealing with a salesperson that relies on the company brand. Don’
t be a victim of financial malpractice. Make sure your Adviser is knowledgeable by doing your homework and becoming
knowledgeable yourself, preferably before you hire someone.
3. You Simply Can’t Stand Your Adviser
This reason may be trivial to many, but it is more important than you think. Human interaction and personal chemistry is
important. If you don’t feel comfortable communicating with your Adviser you are putting your money at risk. Your Adviser
is supposed to serve as your guide through this ever changing financial maze, and they need to be able to understand
your overall financial picture. Equally as important, you need to be able to understand them. If you can’t stand him or
her you may be reluctant to share the details of your current financial situation which may put your money in jeopardy.
Likewise, if they don’t like you, they may be less likely to provide you with the level of service and attention that you
deserve.
This is a bad situation to be in and should not be taken lightly. It’s your money, find a competent Adviser with whom you
can comfortably communicate with.
Top 5 reasons you may dislike your Adviser:
4. Your Portfolio is Made up of All Proprietary Products
Want to see a completely biased portfolio? Just look at one with all proprietary funds. It always amazes me that out of
thousands of available mutual funds and exchange traded funds with low expenses, investors are still buying the idea
that proprietary funds are better. If you have your brokerage account at Mickey Mouse and Company and all of your
investments are Mickey Mouse Large Cap, Mickey Mouse Small Cap etc., I can assure you that you are paying more than
you should. Your Adviser may not tell you this but he or she is getting a commission by selling you these funds. Your
overall portfolio could be costing you up to 2-3% per year, but they will tell you that there is no charge for the advice. We
should all know by now that nothing in life is free and no one works for free. This is 2-3% that is coming right out of your
returns.
If your Adviser never bothered to tell you how much your overall portfolio would cost you, it’s simply dishonest. You
cannot build trust on dishonesty and hidden agendas.
5. Your Portfolio Consistently Under Performs Its Appropriate Benchmark
Any investor knows that returns will vary from year to year and that this year is one of the worst years as far as
performance is concerned. So when it comes to performance, you have to remember that your Adviser is not a
magician. Having said this, you should expect to meet certain benchmarks. If you are invested in all US Large Cap
Stocks the appropriate benchmark is the S&P500. Now let’s say the S&P has returned -32% year-to-date, and your
portfolio is well below this benchmark at say -40% year-to-date, then you are under performing the benchmark. If your
Adviser consistently under performs the appropriate benchmark, year after year, you may want to reconsider the advice
you are getting.
6. You Never Know Who Your Adviser is Because There is Considerable Turnover at the Company
If there was ever a time to consider firing your Adviser this would be the time. High employee turnover means the
following for you:
7. You Don’t Trust Your Adviser
The relationship you have with your Adviser should be one of mutual trust. Your Adviser should trust that you are
providing him or her with all the details necessary to help you make better financial decisions, and you should trust that
your Adviser has your best interest at heart. Once the trust is broken for any reason mentioned above, it’s extremely
difficult to rebuild that trust again. It may just be time to say goodbye and start again. Hopefully you will take the lessons
learned from your experience and avoid them with your next Financial Adviser.
Ever gotten that feeling that your Adviser could care less whether you stay with him or her? The reason may be simple;
your account is too small for them now. They may have treated you like royalty when you first became a client, but now
they barely return your phone calls. This is a very common phenomenon and it’s happening more and more as firms
continue to get consolidated.
Currently there are many investment companies, banks, and wealth management firms that are trying to divest
themselves of small brokerage accounts (less than $3 million) by either centralizing many of the relationship
management responsibilities or simply relinquishing the relationships. At $3 million, this is the point at which you as a
client are perceived to be "profitable" to a large firm.
So what should you do? For starters look for a company that not only provides the services you are looking for, but is
also happy to provide these services to clients with your portfolio size. Go to NAPFA (National Associations of Personal
Financial Advisers)and do a search for local and national Advisers. Ask the different companies what their average,
largest and smallest account size is. This will give you an indication of where you would stand as a client. Don't tell
them how much you have, as they may want to skew the numbers.
2. Your Adviser Has Limited or No Credentials
Credentials and degrees are not always a guarantee of professional competence, but they are a start. Just like you
would be hesitant to go to a Doctor that does not have a Medical Degree you should be hesitant of a Financial Adviser
that does not have the right credentials and experience.
What Should You Look For? The highest credential in the industry for a Financial Advisers is the CFP™ accreditation.
What this credential says is that your Adviser has studied and passed comprehensive exams on issues such as
investing, insurance, estate planning, retirement planning, taxes, and other pertinent issues relating to managing
wealth. This is not an easy exam to pass. It can take as long as a full year to complete all modules and become
accredited. A great thing about this credential is that the Adviser is not allowed to use the CFP™ mark even after they
have passed the comprehensive exam if they do not have at least 3 years of experience. In addition to this they also
have to adhere to high ethical standards and meet continuing education requirement to keep the designation. Click here
to see the full range of requirements.
So a CFP™ should be your minimum requirement. There are other designations out there such as CFA and ChFC.
There is certainly no shortage of acronyms in this industry. What you have to remember is not to be intimidated by the
arrangement of letters behind your Adviser’s name. Find out how easy or how hard it is to obtain these designations
and what these mean to you. A rule of thumb is, If you can obtain the designation by passing an exam that only takes a
week to study for it, you should discount it immediately. Otherwise you may end up with a salesperson, rather than a true
Financial Adviser.
Aside from a CFP™ or other credential you should still do more due diligence. Ask any new potential Adviser hard
questions about the economy, their investment style, investment philosophy, IRA rules, tax rules, etc. If they can’t answer
these types of questions, then it is likely that you are dealing with a salesperson that relies on the company brand. Don’
t be a victim of financial malpractice. Make sure your Adviser is knowledgeable by doing your homework and becoming
knowledgeable yourself, preferably before you hire someone.
3. You Simply Can’t Stand Your Adviser
This reason may be trivial to many, but it is more important than you think. Human interaction and personal chemistry is
important. If you don’t feel comfortable communicating with your Adviser you are putting your money at risk. Your Adviser
is supposed to serve as your guide through this ever changing financial maze, and they need to be able to understand
your overall financial picture. Equally as important, you need to be able to understand them. If you can’t stand him or
her you may be reluctant to share the details of your current financial situation which may put your money in jeopardy.
Likewise, if they don’t like you, they may be less likely to provide you with the level of service and attention that you
deserve.
This is a bad situation to be in and should not be taken lightly. It’s your money, find a competent Adviser with whom you
can comfortably communicate with.
Top 5 reasons you may dislike your Adviser:
- 1. You can’t understand what your Adviser is saying (@#$!^*&^%!) and they don't make the effort
to help you understand.
2. Your Adviser speaks over your head (it’s on purpose so you don’t ask questions they can't answer)
3. When you ask a question, your Adviser dismisses it as if it were a stupid question
4. If you don’t call him or her you never hear from them
5. Your Adviser forgets that it’s your money not theirs
4. Your Portfolio is Made up of All Proprietary Products
Want to see a completely biased portfolio? Just look at one with all proprietary funds. It always amazes me that out of
thousands of available mutual funds and exchange traded funds with low expenses, investors are still buying the idea
that proprietary funds are better. If you have your brokerage account at Mickey Mouse and Company and all of your
investments are Mickey Mouse Large Cap, Mickey Mouse Small Cap etc., I can assure you that you are paying more than
you should. Your Adviser may not tell you this but he or she is getting a commission by selling you these funds. Your
overall portfolio could be costing you up to 2-3% per year, but they will tell you that there is no charge for the advice. We
should all know by now that nothing in life is free and no one works for free. This is 2-3% that is coming right out of your
returns.
If your Adviser never bothered to tell you how much your overall portfolio would cost you, it’s simply dishonest. You
cannot build trust on dishonesty and hidden agendas.
5. Your Portfolio Consistently Under Performs Its Appropriate Benchmark
Any investor knows that returns will vary from year to year and that this year is one of the worst years as far as
performance is concerned. So when it comes to performance, you have to remember that your Adviser is not a
magician. Having said this, you should expect to meet certain benchmarks. If you are invested in all US Large Cap
Stocks the appropriate benchmark is the S&P500. Now let’s say the S&P has returned -32% year-to-date, and your
portfolio is well below this benchmark at say -40% year-to-date, then you are under performing the benchmark. If your
Adviser consistently under performs the appropriate benchmark, year after year, you may want to reconsider the advice
you are getting.
6. You Never Know Who Your Adviser is Because There is Considerable Turnover at the Company
If there was ever a time to consider firing your Adviser this would be the time. High employee turnover means the
following for you:
- 1. Bad service - The level of service if there was ever a level, will become nonexistent. You have to retain your
employees to create a culture of service. If you have high turnover who is going to do the training? Beware of the
revolving door.
2. There is something seriously wrong with the company – Make no mistake, the employees that left the
company know something you don’t. All businesses go through changes but constant employee turnover is a
red flag that there is something clearly wrong with the company or the management team.
3. Errors that will cost you money - Critical tasks related to your financial plan may be missed to your detriment.
You have to build a history with your Adviser so that he or she can make informed recommendations. You will be
basically starting from scratch with every new Adviser. Can you say missed or late distributions, account trading
or reporting errors...the list can go on.
7. You Don’t Trust Your Adviser
The relationship you have with your Adviser should be one of mutual trust. Your Adviser should trust that you are
providing him or her with all the details necessary to help you make better financial decisions, and you should trust that
your Adviser has your best interest at heart. Once the trust is broken for any reason mentioned above, it’s extremely
difficult to rebuild that trust again. It may just be time to say goodbye and start again. Hopefully you will take the lessons
learned from your experience and avoid them with your next Financial Adviser.
7 Good Reasons to Fire Your Adviser by Cathy Pareto, MBA, CFP
| Investment Management and Financial Planning |
The right to download, store and/or output any material on this Web site is granted for viewing use only. Use or viewing of this site acknowledges that you have read,
understand and will abide by our terms of use, legal notices, and disclaimers.
understand and will abide by our terms of use, legal notices, and disclaimers.
