Whether your Financial Advisor is a suave, fast talking investment guru, there comes a time when you have to consider whether you need to sever ties, so here’s 3 warning signs to watch out for:
Do you remember the first few months/years of the relationship you had with your Financial Advisor? You were constantly kept up to date about anything concerning your portfolio, be it short-term events such as a quarterly company earnings or longer-term macro events such as what a possible rate hike means for your mortgage.
But a few years of fees and an ever increasing client roster has meant that you have fallen down the pecking order, possibly passed down to a Junior Advisor, barely just out of grad school. A successful Financial Advisor usually manages his client’s wealth as if it were his own, so if it proves too much of distraction for your financial advisor to keep you updated on your portfolio positions or reassure you about how future events will adversely affect your portfolio, it’s time for ‘the talk’.
2) Starts to deviate from the original financial plan
Usually, during the initial discussions, your Financial Advisor’s mission involves building financial fact file, which may include discussions about your current level of income, your expenses and investment aims such as building a nest egg for retirement or a college fund for your kids. This is required to ensure that he/she has sufficient information to furnish a financial plan to meet your investment aims. So, if you’ve noticed your Financial Advisor deviating from the original investment plan, then it is time to probe further.
For example, you may be nearing retirement but he/she is insistent that you acquire exposure to high-growth sectors, claiming it to be a ‘sure thing’. In this scenario, your call to terminate the relationship is the only ‘sure thing’ you should be considering.
3) Sudden increase in fees:
Fees are the bread and butter for most Financial Advisors, it’s what gets them up the morning. You should be weary if there is a sudden increase in fees with no formal warning or logical reason as it could be a sign that your Financial Advisor is in trouble, perhaps other clients have severed ties, so increasing fees is quick fix for him/her to plug the leak.
Should you find yourself on the verge of firing your Financial Advisor, it’s not the end of the world, there are plethora of other investment solutions, which may even include a small welcoming bonus to get you started. You may discover that you enjoy taking a hands-on approach, when it comes to investing or follow the millions of other investors, who have chosen to leave their portfolios under the watchful service of roboadvisors. Whatever or whoever, you choose as a suitable replacement for Financial Advisor, you should ensure that your investment portfolio gets the level of focus it deserves.
Yasin Ebrahim, CAIA, FRM is an investment professional. His writing provides an alternative perspective from private equity to public equity. Covering trends often missed by the mainstream media and translating it into easily digestible information.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.