Question: I have a problem with a financial advisor. I transferred all my money to a large investment management company about 10 years ago. I worked with a great guy there for almost 8 years, but he retired over 2 years ago and I was assigned a new guy, who came out. I am close to retirement and I feel uncomfortable. He made transactions last year that cost me dearly tax-wise. This never happened in previous years with my former adviser. I may be meeting with another large investment management firm next week to see if I should jump ship. suggestions? (Also looking for a new financial advisor? This tool can help you find an advisor who might meet your needs.)
Answer: Before determining whether you should jump ship, here’s a little insight for you. In large investment management companies, the financial advisor is often not the one doing the transactions; if they are, it is not always guaranteed that they are fiduciary and working in your best interests. Often, salespeople called brokers pass information on to investors (people like you) and then either execute the trades themselves if they are brokers or pass them on to the company’s trading staff.
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That said, the advisor or broker should be able to explain the trades and tell you what happened. “Communicating your discomfort to the financial advisor could clear the air and change your opinion of the advisor,” says certified financial planner Danielle Miura of Spark Financials. Some of the questions you may want to consider asking are how they communicate with clients about portfolio changes or what happens if the advisor retires or leaves the company. (Also looking for a new financial advisor? This tool can help you find an advisor who might meet your needs.)
This advisor may simply not be right for you. “Finding an advisor you’re comfortable with is important to your financial success,” says Miura. And know this: there are many different advisors, including those who specialize in working with pre-retirees who are familiar with your concerns. “You don’t have to settle for an advisor assigned to you by your investment management company. It may take some effort to find the right person, but it’s up to you who you want to serve with,” says Certified Financial Planner Bill Kan of Candent Capital.
Certified Financial Planner Eric Henderson at East Horizon Investments says his advice would be to shop around like you’re looking for a new close friend or maybe even a spouse. “Ultimately, when discussing your money, the conversations can become just as personal as discussing sex, politics, health or religion. In a relatively short time, you should be able to weed out the people you don’t want,” says Henderson.
Remember to slow down when focusing on the latter. “While you shouldn’t waste anyone’s time, including your own, finding the right partner for this relationship is critical,” Henderson says. MarketWatch Picks has highlighted important questions to ask a potential advisor in this guide. (Also looking for a new financial advisor? This tool can help you find an advisor who might meet your needs.)
You may want to consider going the investment management firm route and instead hiring a fee-only certified financial planner. Paid planners do not receive compensation from financial companies for recommending their products, and instead are paid by you and work in your best interests. And experts say you should interview no less than three potential companies or planners – and look for someone who can explain the tax implications of what you’re doing, because that was an issue before with your adviser. (Looking for a new financial advisor? This tool can help you find an advisor who might meet your needs.)
You can find good advisors that are right for you on networks such as the National Association of Personal Financial Advisors (NAPFA), the XY Planning Network, or the Certified Financial Planner (CFP) Network. “The CFA Institute and the CFP network are two certification bodies considered as benchmarks in investment management and financial planning, respectively. Their members hold themselves to a fiduciary standard,” says Kan.
Before jumping ship, interview the new company and reference your past experiences with financial advisors. “Unfortunately, many advisors verbally dabble in detail and aren’t always the best at communicating complex concepts to clients who don’t have that level of expertise. It’s kind of like the equivalent of a doctor’s bad bedside manner. So don’t be afraid to ask questions,” says Certified Financial Planner Joe Favorito of Landmark Wealth Management.
(Also looking for a new financial advisor? This tool can help you find an advisor who might meet your needs.)
* Questions edited for brevity and clarity.
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