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Updated on Wednesday, February 10, 2021
If you are thinking about firing your financial advisor, there are several steps you should take before officially giving them the boot. This includes evaluating why it’s not working out, reviewing your contract, collecting the necessary documentation and finding a replacement.
In this article, we’ll walk you through the process of how to fire your financial advisor step by step, so this breakup doesn’t have to be any harder than it needs to be.
4 steps to take to fire your financial advisor
1. Evaluate whether you should fire your financial advisor
Before you begin the process of firing your financial advisor, you should first figure out why you’re unhappy with their services in the first place.
In general, you should evaluate the following aspects of your financial advisor’s services:
- Their investment strategy: You should have a firm understanding of and be in agreement with your financial advisor’s investment strategy. Beware of financial advisors who have an investment strategy rooted in timing the market: If you find your advisor is constantly pushing products on you or bragging about their ability to beat the market, it might be time to look elsewhere, as many experts agree that timing the market isn’t a sound investing strategy. Additionally, you should evaluate whether your advisor uses a cookie-cutter, one-size-fits-all approach to your finances, or whether they’re truly taking your unique circumstances into account. You’re paying them to provide a customized plan, after all, not the curated models and portfolios that you could likely get for less elsewhere, such as through a robo-advisor.
- Your portfolio’s performance: Keep in mind that no financial advisor can promise a silver bullet, and your portfolio’s performance will likely ebb and flow. However, if you find that your portfolio’s performance is consistently down despite the market being up, consider consulting with another financial advisor to get their professional opinion on your advisor’s performance. However, you shouldn’t fall into the trap of conflating a particular investment’s performance with your advisor’s performance. David Shotwell, a certified financial planner (CFP) at Shotwell Rutter Baer, in Lansing, Mich., noted that people mistakenly focus on investments and returns when evaluating an advisor. “The value of an advisor is mostly about the planning and matching investments to the plan, rather than in the investments themselves,” Shotwell said.
- Their fee structure: If you feel that the fees you’re being charged don’t translate to the value that your advisor is providing, or that their fees are much higher than the average in your market, it’s time to reconsider. Be wary of commission-based advisors, and those who consistently push products. In addition, if there’s a lack of transparency when it comes to the fees you’re being charged — and how they’re being calculated — it could be time to move on.
- Their communication style: You might find that your financial advisor doesn’t communicate with you clearly, or they don’t reach out with updates as often as you’d like. Compatibility is key when it comes to entrusting someone with managing your money, so if you feel like you and your financial advisor are never on the same page — or they don’t give you the information you need to feel comfortable with their decisions — it might be time to reevaluate.
Of course, your reason for deciding to part ways with your financial advisor could have nothing to do with them. You also may want to switch professionals if your personal situation changes. For example, if you inherit a significant amount of money, you might be in the market for an estate planner and wealth manager who has experience working with more affluent clients.
“I think the biggest driver for the decision to make a change in financial advisor is a change in someone’s personal circumstances or situation,” said Adam Wojtkowski, a CFP at Smith Salley & Associates in Walpole, Mass. “An advisor that helped someone during the accumulation years may not necessarily be the best advisor to help during the spending years.”
Wojtkowski explained that a client in their retirement years, for example, may want an advisor focused on the tax implications of retirement accounts, Social Security, pensions and qualified dividends.
“Advisors that help clients with that every day will be able to think through the potential tax issues better than a generalist,” he said.
2. Review your contract
Once you’ve reviewed your financial advisor thoroughly and decided it’s time to move on, you’ll need to review the contract you have with your advisor (or your advisory agreement). Your document may outline the steps you need to take to actually terminate your advisor, such as giving them advance notice or writing a formal letter (which we cover in the next step).
Additionally, your contract should detail whether you’ll face any termination fees, which can include charges tacked on for ending your contract early. These costs can typically climb as high as 1%.
3. Collect your investment records
Before cutting ties with your current financial advisor, make sure to collect all of your investment records, which you’ll want to have when filing your taxes. Documentation you should ask for can include:
- Cost basis of securities you have in taxable investment accounts
- Records and statements for all of your investment accounts
- Your tax records from the past two years
Your financial advisor is legally required to provide you with all of your investment records.
4. Fire your financial advisor via letter, phone call or in-person
At this point, you’re ready to actually cut ties with your current financial advisor. The firing process can be emotionally difficult, but keep your communication with your advisor professional, concise and firm.
You can notify your financial advisor of your decision either through a formal letter, an email, a phone call or in-person. Regardless of your method of communication, though, make sure you specify an end date for their employment with you. If you do opt for a phone call or in-person conversation, it’s beneficial to still have the date of the termination clearly stated in a written letter or email.
How to hire your next financial advisor
Finding a new financial advisor sooner rather than later offers advantages — and in many cases, your new advisor can help with the transition process of moving from one advisor to another.
Other resources you can use to find a new financial advisor include:
- FINRA’S BrokerCheck tool: With this resource, you can search for a specific financial advisor or firm. It provides information such as their employment history, regulatory actions, investment-related licensing information and arbitrations and complaints.
- Let’s Make A Plan directory: The CFP Board’s official website features a searchable directory that allows you to look up certified financial planners in your location, whether it’s by city, state or zip code. The benefit of working with CFPs is that earning the designation requires completing coursework, passing an intensive exam and adhering to ethical guidelines, so you can have more assurance that you’re in capable hands.
- Friends and family members: Another option is to consult the people you know and trust, such as friends and family, especially if they’re in a financial and life situation similar to yours. Ask them whether they’d recommend their own financial advisor or their financial advisor’s firm.
Beyond knowing where to look for a financial advisor, you’ll also want to know what to look for in your new financial advisor so you don’t end up in the position of needing to fire a financial advisor again. Questions you should come prepared to ask a potential new advisor can include:
- Are you a fiduciary?
- What certifications do you hold?
- What services do you offer?
- What are your fees?
- What is your investing philosophy?
- How do you like to communicate with your clients?
The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.