10 Signs That You Need a New Financial Advisor
Professional relationships can be tricky. We’re more familiar with our lives, and those around us, so evaluating personal relationships comes more natural for many of us.
However, what about evaluating professional relationships?
If you currently have a financial advisor then it’s important to evaluate that relationship on an ongoing basis.
When it comes to your financial advisor, there's no reason that you shouldn't be completely satisfied with them. This is especially true in our day and age where technology has better equipped advisors and expanded the pool of advisors that you can choose to work with.
Here are 10 signs that you need a new financial advisor.
Note: If you don't currently have a financial advisor then these items are great for screening potential advisors or bookmarking for a time when you do have a financial advisor. Also, I may use “financial advisor” and “financial planner” interchangeably.
#1: They aren't listening to you.
There's nothing more discouraging than when you're heard but not understood. And furthermore, when someone isn't interested in understanding you.
When it comes to your personal finances, you deserve someone that will listen and take the time to fully understand where you're coming from.
I try to listen, ask questions, get better information, and ask better questions.
The reality is that a proper solution can't be prescribed without a proper and thorough diagnosis.
How would you feel if you visited the doctor for a medical issue only to have them prescribe you a treatment plan without running any tests or asking you any questions?
A great indicator of an advisor that listens well is if they’re able to repeat your concerns in detail and if they ask for clarification.
#2: They are disrespectful to you and/or a partner.
Disrespect can come in many forms and we’re seeing it more and more within this profession. The fact that many advisors do it intentionally is scary and it’s scarier when they’re unaware that they’re being disrespectful.
Ways that you may be disrespected within the relationship with your financial advisor:
They repeatedly fail to listen and understand you
They tell YOU what should be important to you
They lie or gaslight you
They aren’t sympathetic to your situation
They make assumptions without confirming
They only speak and pay attention to the man in the relationship and disregard the woman
They belittle you or a partner
These are just a handful of ways that you can be disrespected but keep your eyes open for other ways as well.
Again, there are too many phenomenal advisors out there, that will treat you with dignity, to stay in a toxic relationship.
#3: They purposefully obscure things.
The financial services industry has been notorious for complicating things more than they need to be. Often times this is a calculated move so an advisor can seem like a "knowledgeable expert” AND so that you, and the advisor, convince yourself that you NEED to work with them.
However, if an advisor can't maintain a degree of simplicity and clarity for their clients then the client will lose every time. As a client, if you don't understand 100% of every strategy being implemented on your behalf then you should reconsider advisors.
Advisors that can educate and communicate their recommendations clearly and concisely are who you want to be working with.
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
Note: Many situations aren't "simple" but I'm stating the fact that advisors intentionally make matters convoluted to their clients or prospects in order to strategically position themselves for personal gain.
#4: They are poor communicators.
Perhaps one of the biggest factors of discontentment among clients is their advisor's lack of communication with them. As a client, you should always be in the loop about progress, processes, and outstanding items.
Now, I understand that advisors can't keep their clients 100% updated in real time but you should always know the status of aforementioned items and the responsibility of whose those items are. You should also expect updates within a reasonable timeframe.
Also, advisors have phone, text, email, and video message at their disposal to keep clients updated. There’s hardly an excuse for lack of ways to communicate with clients these days.
Finally, like I mentioned above, advisors should be able to clearly and concisely explain concepts, strategies, investments, reasoning, and more to their clients. This is simply part of the job.
#5: They’re never available or never meet with you.
Being available and meeting with clients is part of the job. So if this isn’t happening then it should be a red flag, especially if they’re continuing to be paid by you or your investments.
It’s important to understand that advisors may have varying service calendars may meet more or less frequently with specific clients. This is okay BUT it needs to be communicated upfront. It also needs to be communicated if you’ll be engaging primarily with them or another associate.
You should know exactly how available your advisor will be to you and how often you will be meeting with them.
If this isn’t the case, then they simply aren’t prioritizing you and you need to look elsewhere.
#6: They aren't independent, fee-only, and a fiduciary.
I’m a little biased but I feel your advisor needs to be independent, fee-only, and a fiduciary. By possessing these three key features you can rest assured that an advisor has positioned themself in a way to put their client’s best interest first.
This isn't to say that all good advisors will have all three qualifications. But you can have a degree of peace when an advisor does possess all three.
When an advisor isn’t independent, then their allegiance can sway to the party, or company, they “work” for.
When an advisor isn’t fee-only, then the advice that you receive could be conflicted and tied a specific financial product (again not in your best interest).
When an advisor isn’t a fiduciary, then they aren’t legally, or ethically, obligated to act in your best interest.
#7: You're paying for more than what you're getting.
You’re getting the unfair side of the deal when you aren't receiving enough for what you're paying for. This a reminder to always know what you're actually paying. Ask your advisor for the dollar amount that your fees amount to or review your investment statements.
“Price is what you pay. Value is what you get.”
It only makes sense to work with an advisor if you're receiving value above and beyond what you're paying to access their services. Warren Buffett said it best, “Price is what you pay. Value is what you get.”
I tell my clients, and prospects, that it only makes sense to work me on an ongoing basis if they’re continually receiving more value for what they are paying for.
Plenty of advisors are providing a ton of value to their clients through their expertise, well designed systems, and top notch service. This is one of the primary benefits of working with a great advisor.
#8: They aren't specialized in you and your situation.
You belong to a very specific niche. You have specific complexities and needs when it comes to your personal finances.
For example, if you’re reading this then you’re likely a Millennial, an early to mid-career professional, receive equity compensation, or a combination of all of these.
Because of this your needs are very specific to the complexities that those qualities bring.
It makes very little sense to work with an advisor that’s unfamiliar with your specific financial planning needs (such as an advisor that serves retirees).
By working with a generalist (an advisor that works with anybody), you can bet that you're advice will be general in nature. In fact, it’s the only way a generalist can stay in business is by working with anybody. If you’re receiving similar advice that another client is receiving then you know you’re working with a generalist.
Instead, you should be working with a specialist that specializes in serving people like you. It's the only way you know you're getting the best and most customized advice for your personal situation.
Ask these questions to your current or prospective advisor, “Who are your typical clients?” and “Who do you do your best work for?”
This will tell you everything you need to know about who they serve and if you’re in the right or wrong place.
#9: They only talk about investments and/or economic outlook.
Don't get me wrong, investments and the economy are important. They just aren't the only important piece of your financial life. And honestly, so many areas of your financial life need much more active attention.
You need a financial planner, not an investment manager. A great financial planner will be able to address all the areas of your financial life in a comprehensive way, including your investments.
An advisor that understands that you should focus on what’s important and what you can control is a keeper.
When your advisor only talks about investments you miss out on valuable areas of your financial life that you can be planning and optimizing.
Note: Some financial planners will also manage your investments.
#10: They have a disciplinary history.
Financial advisors go through training and education to get to where they are. In that journey, they learn what unethical conduct is and have to agree to conduct themselves in an ethical way according to their particular standard (i.e. I operate under the fiduciary standard).
When advisors choose to act unethically they can do severe damage to their clients. An advisor’s integrity should be of the utmost importance when determining who to work with.
You can always do a background check an advisor’s disciplinary history at FINRA’s BrokerCheck or at the SEC’s Investment Adviser Public Disclosure website.
Deep down inside you may have already had a feeling that you need to seek out a new advisor and the reasons above may have just been an affirmation of that feeling. Take this as permission to start looking for a new advisor.
Again, these aren’t all the reasons that you should consider seeking out a new financial advisor so be vigilant in your current relationship.
When it comes to your personal finances you deserve to be 100% confident that you’re working with the right advisor. There are too many great advisors out there to settle for anything less than what you deserve.
