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It May Be Time For You to Find a New Financial Advisor

Choosing a financial advisor is one of the most crucial financial decisions you can make. Financial advisors are professionals who can assist with a host of personal financial services such as financial planning, tax planning, estate planning, debt management, investment planning, budgeting, risk mitigation, and more. A good financial advisor needs to have the required skills, qualifications, and above all, experience. However, finding a financial advisor you can trust is equally crucial when it comes to managing your finances. After all, this person will be responsible for helping you make important decisions about your money and your future.

However, there are different types of financial advisors. Their fee structure, area of expertise, and personality traits may differ. Additionally, their way of working, advice, and recommendations may or may not align with your goals. If you start to feel like your financial advisor is not living up to your expectations, it may be time to find a new one. It is essential to spot some signs that it may be time to start looking for a new financial advisor. Keep reading to find out what these are.

When should you get a new financial advisor?

Here are some situations where you can consider hiring a new professional:

1. Poor or unfavorable portfolio performance

Evaluating your portfolio's performance can be the first step to analyzing your financial advisor's role and contribution to your financial well-being. You can start by comparing your portfolio performance to a benchmark index, such as the S&P 500. This will give you an idea of how your portfolio is performing relative to the overall market. If your investments have not done as well or if you are not earning in alignment with your goals, it may be time to switch to a new financial advisor. Most financial advisors conduct quarterly or annual meetings where they discuss how your portfolio has fared over time. This can be a good time to gauge whether the financial advisor has been on the mark. You can also ask your financial advisor for regular updates on your investments or review your portfolio regularly yourself. This will help you stay informed about your portfolio's performance and allow you to ask your advisor about any concerns you may have. If the financial advisor recommends additional steps, you may implement them and see how they pan out. However, if there is no improvement, you can hire another professional. Before you do so, you can consider seeking a second opinion from another financial advisor temporarily. This can help you get a fresh perspective on your portfolio and ensure that you are on track to meet your financial goals.

2. Irregular or no communication from the advisor

One of the primary jobs of a financial advisor is to give clients regular updates on their financial plans. It helps you stay informed about your investments and the performance of your portfolio. Timely communication allows you to discuss your financial goals and concerns with your advisor, so they can help you develop a plan to meet your objectives. It also enables you to make informed decisions about your investments and ensure that your portfolio is aligned with your risk tolerance and financial goals. Further, a clear communication channel helps build a strong, trusting relationship between you and your financial advisor, which is essential for successful financial planning. If you are not regularly communicating with your financial advisor, you lose out on the possibility of finding new market opportunities that may benefit you. You also lose out on the opportunities to identify problems in your financial plan and rectify them at the right time to avoid losses.

Losses and gains, changes in expense ratios, inflation, etc., impact your financial goals. A financial advisor should ideally keep you updated on how market ups and downs affect your money. If your financial advisor has not given you any updates or is hard to reach out to, you can hire a different financial advisor.

3. No changes to your portfolio has been made for a prolonged period of time

If you are unsure about when you should get a new financial advisor, consider taking a look at your life and if there have been any changes in it recently. Life events like getting married or divorced, getting a new job and salary hike, receiving an inheritance, having children, etc., can also impact your finances. For instance, if you inherit a significant amount of money, you must know how to use it effectively towards your needs and goals. A good financial advisor can advise you to use this money to clear your debt, invest for future goals, save some as an emergency fund, etc. You may have some short-term goals that the inheritance can help with, such as necessary home repairs. Likewise, if you are planning to buy a house in the future, the inherited money may come in handy towards the down payment. Your inheritance may also include assets that you may or may not need. However, selling them off can trigger tax liabilities. Ideally, a financial advisor must factor in these issues and develop a plan that is ideal for you. Similarly, if you have started a new job and earn more than you did before, you should ideally be increasing your savings and investment budget, too. A good financial advisor should account for the change in your income and alter your portfolio accordingly by either suggesting new investments or increasing your contributions to the existing ones.

As you grow old, your risk appetite will also change. Your asset allocation should reflect this change at all times. It is the financial advisor's duty to review your portfolio and recommend modifications to suit your risk tolerance levels. If you have seen no changes or recommendations from your financial advisor's end despite such changes in your life, you may need to look for a new professional.

4. Lack of trust

Trust is extremely important when it comes to choosing a financial advisor. Your financial advisor will be responsible for managing your investments and providing guidance on financial matters, so it is essential that you feel confident in their ability and integrity. A good working relationship with your financial advisor allows you to feel comfortable discussing your financial concerns and goals. This is essential for developing a financial plan that meets your needs and helps you achieve your objectives. Trust also gives you confidence in the financial advisor's recommendations and decisions. If you do not trust the professional, you are less likely to follow their advice, which could have negative consequences for your financial well-being. Trust is key to building a strong, long-lasting relationship between you and your financial advisor. This is important because financial planning is often a long-term process, and you will want to work with someone you can rely on for the long haul.

If you are not able to fully trust your financial advisor and doubt their intentions, it may be advised to end the association at the earliest. You can look for signs like whether or not the professional is recommending investments to earn commissions themselves. Some financial advisors get commissions from insurance companies or mutual fund houses. If the professional is pushing products that do not meet your goals, they may be acting from a place of personal interest. Additionally, if your financial advisor promises unrealistic returns or pressures you into making investments without explaining the product in detail, you may be getting cheated. Financial advisors with improper credentials and a non-transparent fee structure may also not be reliable. Further, if your financial advisor asks you to sign blank documents or recommends illegal activities like insider trading, it is strongly advised to stop all further communications and associations with the professional.

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What questions should you ask your financial advisor?

If you spot the signs mentioned above, you can hire a new financial advisor. However, to ensure that you do not face the same hassles again, remember to ask the following questions from the professional:

1. How are they compensated? 

It is crucial to understand how your financial advisor is compensated and whether their interests are aligned with yours. Therefore, ask them if they follow a commission-based fee, a flat fee, Assets Under Management (AUM) fee, or an hourly fee structure. Clarifying these details ensures no discrepancies later, and you pay for what you choose, nothing more and nothing less.

When talking about compensation, you should also ask what services they offer within the fee. For instance, some investment advisors may also provide additional services like debt management or estate planning. It is better to clear any doubt before entering into an agreement and be sure of the benefits you can expect from the advisor. You can also negotiate the costs involved in this step. This can help you strike a good deal.

2. Is the professional a fiduciary?

You can ask a financial advisor if they are a fiduciary. Fiduciaries have a legal duty to act in favor of their client's financial interests over their own. Therefore, you can expect better accountability, transparency, and trust from them. You can also ask them if they are open to signing a fiduciary oath, as some people may misuse the title of a fiduciary. However, a written declaration can be more assuring and holds the professional accountable in case things go wrong.

3. What is their investment philosophy?

Knowing a financial advisor’s investment philosophy will give you an idea of the advisor's approach to investing and whether it aligns with your own goals and risk tolerance. For instance, instead of only asking what an investment advisor does, ask them how they do it. Every professional has a unique way of working and may believe in different investment philosophies like Socially Responsible Investing (SRI), value investing, growth investing, etc. However, the important thing is that your investment objectives should match those of your financial advisor. This eliminates conflicts of interest and ensures a smooth relationship.

4. What are their experience, qualification, and education? 

Ask the financial advisor about their experience and education to ensure that they have the knowledge and expertise to provide sound advice. You can look at their certifications and degrees, the college they went to, the designation they go by, etc., to get an idea of what they bring to the table. It is also advised to compare the credentials of different financial advisors before making a choice.

5. Can they provide references from other clients?

Asking for references can help you get a sense of what it is like to work with a financial advisor and whether they have a track record of happy clients. It can also help you understand the type of clients the financial advisor is handling and whether the professional would be suited to your needs too. For instance, some financial advisors may specialize in some fields. Getting to know their clients can help you identify these strengths.

6. How often is the financial advisor willing to meet and communicate? 

It is essential to clearly understand how often you will meet with your financial advisor and how they will communicate with you. If you like monthly, quarterly, or annual updates and reviews, make sure to specify the same and understand if the financial advisor is open to the arrangement. Also, talk about the channel of communication. For instance, meeting in person or catching up over calls, messages, or emails.

Lastly, it is also important to gauge the professional's personality and feel comfortable with them. When you ask these questions to the professional, evaluate the financial advisor's answers as well as their willingness to address your concerns. Their way of talking, body language, reactiveness, and other similar attributes can help you determine if you can continue a long-term association with the professional.

To conclude

Your financial advisor must stay up to date with changes in the industry and be able to adapt their strategy accordingly. They must also be open to suggestions and be willing to address your doubts and ensure complete transparency. Some financial advisors have the right qualifications and experience, but may not perform as you expect them to. In such cases, it is never too late to find another professional that meets your criteria and is better suited to help you in achieving your financial goals.

If you’re looking for a new financial advisor, consider using the free advisor match service. Answer a few simple questions based on your financial needs, and the match tool will help connect you with 1-3 financial advisors that are best suited to help you.

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The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice.
A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.