Think about the last time you fired someone.
Even if you’ve never been an employer, I’m sure you fired someone or some business for poor service. Perhaps it was a restaurant that served cold food. Maybe it was a landscaper who mowed over your roses.
If you receive poor service when you’re paying, you should reconsider where you spend your money. Financial advisers are no exception.
I’ve seen some bad financial advisers. I mean, really bad. Many of them do the very things I’m about to share with you. And if your financial adviser does any of these, you should fire them.
But remember, the motive behind firing your financial adviser should never be out of spite or revenge, but simply that they haven’t served your needs.
If you’re paying for investment advice and management, you deserve to be treated with the utmost respect. After all, you’re handing your nest egg over to another person and trusting them with your financial future. I’d say that’s a pretty big deal!
Here are some reasons you should reconsider working with your financial adviser.
1. They’re Vague About Fees
There are fee-based advisers who earn a commission by selling stocks, bonds and mutual funds. Alternatively, they may charge a fee based on the percentage of assets under management.
Don’t confuse fee-based advisers with fee-only advisers. Fee-only advisers can charge hourly, on retainer (an upfront charge), or a percentage of the assets under management. You would pay a fee-only adviser directly (always make out payments to their business name) instead of them selling some of your funds to collect their fee. Certified Financial Planner professionals (full disclosure: I’m a Certified Financial Planner) can be fee-based or fee-only advisers.
If you haven’t asked your financial adviser how they are paid, now’s the time. If they explained their fee structure to you and you still don’t understand, keep asking. A straightforward financial adviser will reveal exactly how they get paid and should be able to show you how it works on paper.
If you find yourself struggling to get information from them, fire them – nicely, of course.
2. They’re Largely Inaccessible
Financial advisers should be quickly accessible. Here’s what you should expect.
Many financial advisers have offices and typically at least one administrative assistant. When you call during normal business hours, most likely someone will answer the phone.
As a financial adviser myself, I respond to voicemails or messages left with my assistant within 24 hours.
There may also be times when your financial adviser is on vacation. These should be few and far between, but they need rest, too. If your financial adviser is on vacation, they should leave an automated message indicating that or have their assistant tell you so. Your financial adviser should have a good support system in place to take care of you while they are out of the office.
If you know your financial adviser isn’t on vacation and is in good health, and they don’t return your phone call within a week, you should fire them. That might sound harsh, but remember: It’s your money!
There are times when you might desperately need to speak to your financial adviser to get documentation for tax purposes or to make important changes to your account or portfolio. If you don’t get that information or make those changes in a timely manner, you could be in for a world of hurt.
3. They Don’t Take the Time to Discover Your Financial Needs
When I first sit down with a prospective client, I ask questions – a whole lot of questions. Here are just a few that help me determine their financial needs:
- How much credit card debt do you have?
- How is your health?
- How safe is your job?
- Do you want to buy a home?
- Do you have a will or trust?
- Do you have enough money in your emergency fund?
- How do you plan to take care of your kids’ college educations?
- When is the last time you checked your beneficiaries on your accounts?
- How much money would you like to realistically live on during retirement?
- Do you consider yourself a conservative or aggressive investor?
- Do you expect any life-changing events in the future?
- What is your net worth?
Many times these questions lead to others, and over the course of an hour I can have a pretty good idea of how my prospective client might invest – or not invest!
It’s very important to me that I do the right thing for my clients. In fact, I have a fiduciary responsibility to look after the interests of my clients above my own.
If your financial adviser isn’t taking the time to discover your financial needs, it’s time to move on. It’s irresponsible to make financial recommendations without understanding a client’s goals and financial situation first.
4. They Don’t Give You Correct Statements
One day, one of my clients brought in his 403(b) statement from work. He was investing through a reputable company and found out that the adviser in charge never invested the funds.
In fact, they went through the trouble to produce a counterfeit statement. Can you believe it?
That’s why I recommend that clients check their monthly statements and keep an eye out for fraud. If you don’t receive a monthly statement by mail or don’t have access to it online, ask your financial adviser for these important documents.
Seriously, the last thing you want is to find out that there’s some kind of Bernie Madoff-like operation going on. If your financial adviser refuses to show you these statements, fire them – and probably get ready to hire a lawyer, too.
5. They Can’t Explain How Investments Work
Never invest in something you don’t understand. Stated even better: If you can’t explain to your grandmother how an investment works, do not put your money into it.
Financial advisers should clearly explain how investments work. If you ask a question about mutual funds, they should respond clearly and concisely. The same goes for stocks, bonds, IRAs, Roth IRAs, 401(k)s and any other type of investment. They should also show you how you can invest with confidence.
Once you have a firm grasp on how investments work, feel free to invest as you see fit. But never sign up for an investment you don’t really comprehend. Fire your financial adviser if they can’t explain it to your satisfaction.
Hire a financial adviser who’s upfront about their fees, is easily accessible, shows interest in your financial situation, provides clear documentation and answers all of your investment-related questions. Don’t settle for less.
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