When — and why — to leave your financial advisor (2024)

Are your clients thinking about leaving? Will an era of muted returns lead even more financial advisors' clients to jump ship?

A 2015 study by Spectrem Group found that more than 60 percent of high- and ultrahigh-net-worth respondents had switched advisors over their lifetimes. The percentage was 51 percent for the less-wealthy "mass affluent." But are the numbers of dissatisfied clients even higher than this?

Inertia will keep some clients from moving, said Edward J. Kohlhepp Sr., owner and president of Kohlhepp Investment Advisors.

"Sometimes they become friends with the advisor and feel, 'I can't leave; I see him socially,'" he said. "They don't want to hurt the advisor's feelings.

"They'll also think: 'Where am I going to go? I don't want to spend the time looking for an advisor again.'"

For clients considering a change, what warning signs should they look for?

According to the Spectrem study, performance (as opposed to the overall stock market) was one of the three top reasons clients switched advisors, along with "the advisor was not proactive in contacting me" and "did not provide me with good ideas and advice."

Performance, communication

"If judging performance only, clients need to give an advisor three to five years minimum, and realistically, five-plus is probably better," said Ryan Fuchs, a certified financial planner with Ifrah Financial Services. "It may take several years before you can truly see how an investment strategy will work. Ideally, you want to see how they perform during both bull and bear markets," he added.

Others suggest not waiting that long.

"If you're paying a management fee and only receiving investment advice but not consistently beating your appropriate benchmark, it's time to head for the door," said Evan T. Beach, CFP and wealth manager with Campbell Wealth Management.

"You either have results or reasons," he added. "You just don't want those reasons to turn into constant excuses. "If this happens for more than a year, head for the door."

Beach said the most important factor is trust. "If you're not comfortable picking up the phone to call your advisor to talk about your plan, your investments or your life, it's time to find someone new," he said.

For his part, Kohlhepp of Kohlhepp Investment Advisors cautions investors to "be aware if there's a constant switching going on within your portfolio and the advisor is not following a strategy consistently."

Failing to communicate advisor value can cause attrition, he added. "Clients often leave when they don't want to pay fees, because they don't understand what they're paying for or when they want to avoid all risk and put their money in the bank," Kohlhepp said.

Fuchs at Ifrah Financial Services offers a few more warning signs:

  • If you ask questions about fees and your advisor is not willing or able to explain them clearly and in writing.
  • If you do not get timely responses from your advisor or she/he is very difficult to get hold of.
  • If they do not provide an investment policy statement at the beginning of the relationship that lays out the expectations of asset allocation that you've talked about with them.
  • If you do not receive a clear contract on what you can expect from them and what they should expect from you.

Unarticulated expectations

Determining and meeting client expectations is key to retention, said Michael Krol, CFP and chief service officer of Waldron Private Wealth.

"Retention starts with spending a lot of time up front, and we request feedback on client expectations on an ongoing basis," he said.

New clients at Krol's firm are asked to imagine the future, three years hence. "What should have happened financially and otherwise for you to consider our relationship a success?" they are asked. Another query asks for the one thing Waldron Private Wealth is not doing that it should be doing. That question, asked after every major client interaction, may be put to a client directly by his or her advisor via a survey form or by firm executives reaching out to clients later.

Questions for uncovering client expectations

Waldron Private Wealth puts these questions to clients several times a year:

  • How satisfied are you with the relationship you have with [our firm]?
  • How satisfied are you with your [advisor's] ability to answer your questions?
  • How satisfied are you with the overall service you receive from your [advisory] team?
  • How likely is it that you would recommend [our firm] to a friend or colleague?
  • Do you have any additional feedback that you would like to share?

Sometimes you just need to try someone out, said Fuchs with Ifrah Financial Services.

"Until you've worked with a planner, you honestly cannot know exactly what you want," he said. "You can talk to others who have worked with planners and get their thoughts on what they like — and don't — and you can try to figure out what you think you will like and won't.

"But unfortunately, as is the case with many things," Fuchs added, "experience is the best way to figure things out."

— By Deborah Nason, special to CNBC.com

When — and why — to leave your financial advisor (2024)

FAQs

When — and why — to leave your financial advisor? ›

Poor performance, high fees, strained communication and stagnant advice are among the reasons to look for a new advisor. Kevin Voigt is a former staff writer for NerdWallet covering investing.

When should you leave your financial advisor? ›

But these professionals are only as good as the service they provide their clients. If your financial advisor isn't paying enough attention to you, isn't listening to you, or is confusing you, it may be time to call it quits and find a new advisor who is willing to go the extra mile to keep you as a client.

How do you know when to fire your financial advisor? ›

We've outlined some legitimate concerns that may justify a breakup and some that you may want to re-think:
  1. Poor Communication. ...
  2. Lack of Availability. ...
  3. Bad Financial Advice. ...
  4. Failure To Listen. ...
  5. Too Focused on Investments. ...
  6. Less-Than-Satisfactory Results. ...
  7. Not Worth the Money.

Why do people leave their financial advisor? ›

Underwhelming performance is a common reason clients leave financial advisors. Your client may expect a certain rate of return, for example, and be disappointed when you're not able to produce it.

How do you tell your financial advisor you're leaving? ›

You can either call or email your advisor - but letting them know you're leaving and why is a nice thing to do. Your new advisor will actually do all the work of transitioning the accounts for you. A simple email like this would work great...

How do I know if my financial advisor is bad? ›

Here are seven warning signs that it's time to choose a new financial advisor.
  1. They're unresponsive. ...
  2. They don't check in with you. ...
  3. They're inattentive. ...
  4. They have high fees. ...
  5. They push you toward certain investments. ...
  6. You're unhappy with your portfolio's performance. ...
  7. They don't have a good relationship with you. ...
  8. Bottom line.
Jul 21, 2023

How often do people switch financial advisors? ›

How often do people switch financial advisors? People often switch financial advisors when they experience significant life changes or feel their current advisor is no longer suitable, but there is no set frequency for making such a change.

What is a red flag for a financial advisor? ›

On the other hand, fee-based or commission-based compensation structures can both be financial advisor red flags. These advisors may earn part or all of their compensation in sales commissions. In other words, they may be more incentivized to sell products than give advice.

What to avoid in a financial advisor? ›

Here are seven mistakes to avoid when hiring a financial advisor.
  • Consulting with a “captive” advisor instead of an independent advisor. ...
  • Hiring an individual instead of a team. ...
  • Choosing an advisor who focuses on just one area of planning. ...
  • Not understanding how an advisor is paid. ...
  • Failing to get referrals.

What do you say when you break up with a financial advisor? ›

Keep It Professional. When you break the news to your financial adviser, keep it brief and professional. Thank your adviser for his or her help in the past, and explain that things have changed and you're moving on.

Why I quit financial advising? ›

Lack of work ethic. It takes a lot of hard work and discipline to break into a career as a financial advisor. While many are willing to work hard for a period of time, fewer are willing and able to maintain the high-level work ethic required to survive and thrive as a successful advisor.

Should I cancel my financial advisor? ›

Sometimes it comes down to a gut feeling, so if you don't feel comfortable with them, or you don't think they are being honest and transparent about how they handle your money, it's probably time to find a new financial adviser.

Can I ditch my financial advisor? ›

In most cases, you simply have to send a signed letter to your advisor to terminate the contract. In some instances, you may have to pay a termination fee. Before you ditch your current advisor, read through all those dirty details.

When to change financial advisor? ›

Poor performance, high fees, strained communication and stagnant advice are among the reasons to look for a new advisor.

How long should you keep a financial advisor? ›

“If judging performance only, clients need to give an advisor three to five years minimum, and realistically, five-plus is probably better,” said Ryan Fuchs, a certified financial planner with Ifrah Financial Services. “It may take several years before you can truly see how an investment strategy will work.

When should I fire my financial advisor? ›

Mismatched investment philosophy: Your financial advisor should align with your investment goals and risk tolerance. For example, if you're risk-averse and your advisor is pushing high-risk investments without a clear explanation, you're likely better off moving on.

Can you leave a financial advisor whenever you want? ›

Emotionally, breaking up with a financial advisor or financial consultant may be hard to do. Legally, switching financial advisors is pretty straightforward: Sign an agreement with your new firm, and notify your old advisor. However, there may be some financial ramifications.

What percentage of financial advisors quit? ›

Over 90% of financial advisors in the industry do not last three years. Putting it simply: 9 advisors out of 10 would fail!

What to do if you are unhappy with your financial advisor? ›

All financial advisers should be registered with the FCA. This means they meet the right standards and you get more protection if you're not happy with the service. For example, you can complain to the Financial Services Ombudsman and may be able to claim compensation if things go wrong.

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