5 Reasons to Switch Financial Advisors

The relationship between a financial advisor and a client is often long-term, built on trust and effective communication. Depending on your circumstances, it could involve periodic check-ins and projects, such as diagnosing your budget or planning for upcoming milestones, or more ongoing needs, like building and managing a tailored investment portfolio or assembling a holistic retirement roadmap.

Since your advisor holds such an integral role in accomplishing your financial and personal goals, it’s critical to hire someone you rely on and enjoy collaborating with. But what should you do if your advisor doesn’t meet these expectations? In this article, we’ll outline five signs it may be time to consider switching financial advisors and provide methods you can use to find a quality professional.

1. Lack of Communication and Responsiveness

Frequent and thorough communication are two central characteristics of high-quality financial advisors. Experts and firms are responsible for keeping you in the loop on the specifics of your financial plans or notable activity in your accounts. Whether they email, call, text, or send updates in the mail, you should consistently receive complete, detailed information.

Aside from regular reports, your advisor should also be responsive to any questions or concerns you have. Professionals may have many clients and, therefore, might not respond instantly. But it could be a negative if it’s been weeks or months without a response.

According to Justin Haywood, CFP^®, president and co-founder of Haywood Wealth Management, advisors “not being proactive with communication” or “failing to return calls or emails in a timely manner” are two of the most common reasons he sees people going to other professionals or firms. “Clients need to feel that their advisor is engaged and responsive, so when these things slip, it can prompt them to seek someone more attentive to their needs,” he says.

2. Poor Performance

It may be time to seek new expertise if you believe your financial advisor—and, subsequently, your portfolio—are consistently producing subpar results. Though it’s not guaranteed to reach your goals or see high gains even with the most well-constructed plans, it’s not unreasonable to start thinking of other options if you’ve noticed a long pattern of underperformance.

While ideal portfolio and financial performance are subjective and unique to each person’s risk tolerance, time horizon, and goals, there are tangible ways to assess your advisor’s plans. For example, Haywood suggests “comparing your portfolio’s returns against a popular benchmark like the S&P 500 or [one] that closely mirrors your asset allocation” and “[if] your investments consistently underperform the benchmark, it may be worth reevaluating the advisor’s strategy.”

In cases where you’re disappointed with your portfolio’s returns, don’t hesitate to discuss possible changes with your professional. Financial planning and investing aren’t typically “set-it-and-forget-it” processes, but rather may require periodic rebalancing and reassessing goals and strategies.

“If you’re unhappy with your advisor’s performance, it’s important to communicate your concerns. Let them know that you’re dissatisfied, and they may be able to suggest a portfolio that’s more suited to your preferred investment style,” advises Haywood. “If your investments are losing more than you’re comfortable with, ask for a strategy with less risk. If they’re not growing enough, inquire about options with more growth potential,” he says.

3. Lack of Transparency

A financial advisor should be candid about their business practices. That is, they should ensure you have a clear understanding of the fee structures they employ, their compensation, and the services they offer. As a client, it’s crucial to feel comfortable knowing that you’re only paying for what you need and that your advisor doesn’t receive commissions from recommending certain products. So, when things don’t seem right, it may be time to consider switching.

If you’re unclear about a professional’s fees or business activities, Eric Croak, CFP^®, president at Croak Capital, recommends going to them with “point-blank questions about their fees, services and how they are paid.” For example, he proposes you could say: “‘Break it down for me in writing, please, so that I can see the whole thing,’” noting that, in most cases, “a good advisor will have no problem walking you through every penny you’ll be spending.”

High-quality advisors often follow a fiduciary standard—through their professional credentials or government registrations—and typically outline their general business practices on their website, in an initial consultation, and in detail on a Form ADV. The latter is a publicly available document that SEC-registered professionals and firms must prepare, which includes information about fees, services, and conflicts of interest, among other details.

After asking about fees and services, Croak suggests verifying that your advisor avoids conflicts of interest. That is, he says, “do they get a percentage of the price they charge you, plus a kickback for suggesting certain products, for example?” If you still have lingering questions or “suspect they are covering up a conflict of interest,” he adds that you should “trust your instincts,” whether it means asking further questions or simply moving on to more forthright options.

4. You Disagree With Their Approach

Another indicative quality of a strong client-advisor relationship is alignment on your financial goals and the steps to reach them. Specifically, a professional should take time to understand your circumstances and the objectives you want to accomplish and ensure you both agree on how you’ll get there. As your goals change over time, your advisor should also reasonably be willing to adapt your plan to fit your new needs.

“It’s not just about how well your investments are performing, but whether they fit within your other financial goals,” says Croak. “Have they helped you make better decisions? Or are they just looking at investment returns? If all they’re doing is looking at the numbers, that may not be enough,” he stresses.

If your advisor presents you with a plan you disagree with or is unwilling to consider changing course upon new information, consider finding someone else who will. Even if the numbers in your portfolio look fine, as Croak points out, your advisor should see that the approach fits your risk profile and goals. Ultimately, the arrangement is about you and what you want to achieve personally and financially—not so the professional can tell their firm they’ve hit certain performance goals.

Before jumping to another advisory firm, you could try voicing your concerns to your financial professional. Sometimes, there may be an easily fixable disconnect, and having a meeting may be all you need to get your plan back on track. In other cases, it may be better to get a fresh pair of eyes on your portfolio.

“There’s nothing wrong with talking it over first,” Croak underlines. “Often, it’s just a matter of calibrating expectations. Bring up what’s not working for you, and see how they respond. If they make an effort to address your concerns and actually do get better, then great – give them another shot. But if they get defensive or dismissive, that might be a sign to move on. Someone who’s on your team needs to be responsive and open to change when it comes to matters of your money.”

5. They Exhibit Serious Red Flags

Finally, evaluate getting a new financial advisor if your current one exhibits red flags you can’t overlook. While everyone will have unique behaviors or practices that raise their eyebrows, watch for these warning signs that a professional is not the right fit:

• Not a fiduciary. Fiduciaries are legally and professionally bound to act in your best interest. If they’re not one, it will be hard to verify their true intentions or ethics.
• Always selling. Be wary of advisors who use an “overly aggressive sales approach” or try to rush you into decisions or investments you don’t necessarily want, says Haywood. This could indicate they’re more interested in performance targets or commissions than your financial well-being.
• Dismissive. You deserve to feel heard as a client. If the advisor actively dismisses your ideas or thoughts and overshadows your desires, they’re probably not right for you.
• Evasive to questions. Trustworthy experts should be willing to answer any questions you have. For instance, Croak highlights, “If your advisor won’t answer a simple question about how they get paid, that’s a huge flag.”
• You don’t get along. The advisor-client arrangement works best with mutual respect and understanding. If you can’t find any common ground or don’t share similar interests or values, even for unrelated things like sports or hobbies, consider switching to someone who makes you more comfortable.

Bottom Line and How to Switch

Rather than a point of stress, your financial advisor should be an invaluable resource as you work to reach your goals. They should demonstrate the opposite qualities of the signs we’ve listed, providing an open line of communication, transparent fees and services, and adaptive to any shift in plans. So, if you’ve noticed yourself becoming increasingly unhappy or distrusting of your current arrangement, even after attempting to make changes, it might be the ideal chance to seek fresh opportunities.

However, choosing a new advisor can feel like a significant leap, especially if you’ve relied on the same person or company for years. You might wonder if they’ll be upset, or you may feel conflicted about whether it’s the best choice to take your business elsewhere. If you’ve been burned by one expert, it may also feel like a tall task to find another one to trust.

“Switching advisors can be stressful, but it doesn’t have to be confrontational,” says Haywood. “You don’t necessarily need to tell your current advisor that you’re looking elsewhere. Most accounts can be transferred electronically, and in many cases, you won’t need to have a difficult conversation,” he continues.

While searching for a new professional, there are several avenues you can take. First, though, you’ll need to be sure you’re looking for an advisor that fits your needs and follows a fiduciary duty. To do this, Croak says he would “start by getting referrals from friends, family or other trusted sources, and then schedule interviews with a few advisors to see whose coaching style and financial philosophy mesh with your goals and values.” He also emphasizes experts with reputable credentials and designations, as these must uphold high ethical standards and avoid conflicts of interest. Below are some examples:

• Certified Financial Planner (CFP)
• Chartered Financial Analyst (CFA)
• Chartered Financial Consultant (ChFC)
• Chartered Retirement Planning Counselor (CRPC)

Besides word-of-mouth recommendations, an additional method of finding a high-quality financial advisor is using a free matching tool, such as this one. It will ask you a short list of questions about your goals and circumstances. Then, it will connect you with a vetted expert who offers the services you need.