Investors sometimes wonder if they should find a new financial advisor. This concern is a very sober and important thought process and can be quite emotional for a wide variety of reasons.
In general, there are two main reasons why considering a new financial advisor
is so difficult for most people. First, many investors do not understand the various types of financial advisors, and therefore making a switch can be very difficult to make a change. The second reason is that often an investor develops a personal relationship and friendship with their advisor especially if the person is related to the investor in some way.
So why may you many need to change your financial advisor? There are four primary reasons:
1. You Selected the Incorrect Advisor
Because many investors do not understand the various types of advisors that exist, for example the different between a financial planner and an asset manager, investors simply select the wrong advisor. Too many advisors take on any type of client, so it is important for investors to get educated and if indeed they picked the wrong kind, make a change sooner than later.
2. The Advisor is Doing the Wrong Thing
There are many tell-tale actions that reveal an advisor that is doing the wrong thing. For example, if an advisor is investing in too many securities that are manufactured by related companies or their employer, that can be a tell-tale sign of conflicted advice that is not optimal for the investor. Another example are securities that pay a commission or finder’s fee to the advisor, when there are better performing investments available to the investor.
3. Your Needs Have Changed
Sometimes an investor has a change in their life and they need an advisor with different skill sets. For example, if an investor becomes a widow suddenly, she may need to find an advisor that has worked with widows and the unique emotional and cash-flow impacts that exist. No one advisor is expert is every type of investor situation, so if your life changes it may make sense to evaluate other professionals that have deep experience in your needs.
4. The Advisor’s Target Market Has Changed
As the advisory industry has grown and changed over the last 30 years, so have the niches and specialty’s that advisors focus on. If your advisor, for example, now focuses on clients with a $5,000,000 minimum and you have a $750,000 portfolio, it could make sense to look for an advisor that wants more clients like you. It is natural for some advisors to get a narrower niche and in fact more and more advisors are helping clients find a more appropriate advisor these days.
There is nothing wrong with finding a new advisor, and it is actually in your best interest to be aware of the signs that it could be time to do so.
Related: Uncertainty Necessitates Financial Discipline