Five considerations when switching financial advisors

February 27, 2022

Table of contents:

Understanding value and the client/advisor relationship
Do you feel understood and supported?
Can you hear me now?
Clarity is critical
Up to date and well-informed advisors
Five tips to help when switching financial advisors

In the last two years we have an unusually high number of new clients come to us because they were dissatisfied with their current advisor. These are clients who typically have two to five million in investment assets that the advisor was managing for them. Why? Let us identify some of the reasons cited for making a change and what you need to know before switching advisors.

Table of Contents

Understanding value and the client/advisor relationship

First, let’s start by saying that the advisor / client relationship can be a tricky one. We find that if there are not clear expectations by both parties the relationship can run into trouble. First, and most importantly is the question of value provided to the client. Has the value been defined, or has it been left to chance? If it’s not been addressed, chances are eventually the relationship could crumble. Sometimes clients have learned from former advisors that value equates to lots of trading inside a client portfolio. The client gets the impression that the advisor is “doing something” but so often this is the furthest thing from the truth. We end up needing to educate the client that demonstration of value goes way beyond the investment portfolio. At Addis and Hill, our value is in providing ongoing financial planning services – assisting the client through the various stages of their lives. There is an ebb and flow and sometimes the value isn’t even seen. Every client has a financial plan, a tax plan, and an estate plan all of which are centered on the client’s goals and objectives. Most advisors call themselves financial planners, but in reality, very few actually provide those services as it’s hard work. But, for us, the planning is the glue that holds everything together, including a healthy client / advisor relationship.

Do you feel understood and supported?

The second reason cited by clients who have left their current advisor is that they feel neglected. They feel like they have been forgotten. We see this mostly from the large national brands/brokerage firms. Sometimes clients get lost in the sheer size of the firm and the large ones can have difficulty maintaining that personal connection, especially when an advisor moves between firms. We work very hard to ensure that our clients have deep relationships with everyone at the firm.

Can you hear me now?

Lack of communication is also a hot button for most clients. Sometimes advisors simply don’t return phone calls or emails promptly. Sole practitioners can often find it difficult to manage the demands on their time. Not only are they advising clients, but, they are trying to run a business, manage investment portfolios, complete paperwork, and market their services to attract new clients. From experience it takes a lot to run an advisory firm especially with all the compliance demands now being placed on advisory firms. So, you can see why it might take a little time to answer a call. A firm with a little depth in personnel returning a telephone call or email is rarely an issue.

Clarity is critical

Misunderstood goals and objectives are other common reasons clients leave – especially the non-fiduciary type of advisor who can often become clouded by the chance to make a commission on the sale of a financial product – annuities are a perfect example. Frankly, these salespeople are not considered to be advisors to begin with despite the prevalence of them at your local bank or credit union. The most important job as a fiduciary is to understand the “whole” client, not just the “whole” balance in their saving account that can be invested. Secondly, we must make recommendations that are in the client’s best interest – our fiduciary duty. An “advisor” who sells you an annuity is not bound by the same standard. Their first obligation is to the company they work for. To really listen to a client is very difficult to do if one has an agenda – a mandate from above. Just look at the Wells Fargo debacle a few years ago. Were they really focused on a client’s best interests or opening one more account to earn another bonus level?

Up to date and well-informed advisors

We also see clients leave their current advisor because they don’t change with the times and embrace technological advancements and a new way of doing things. If you walk into an advisor’s office and see papers piled high and banks of filing cabinets, it’s a pretty good indication they are not paperless, therefore, way behind the curve and may not be meeting the needs of their clients in a digital world. Security of client data may also be lacking.

Five tips to help when switching advisors

Advisory relationships can be very rewarding for both advisors and their client, but, it takes work on both sides to make it successful. If you are considering a change, here’s a few tips so that you choose the best one for you:

Ask lots of questions up front to make sure you share common values and are on the same page.
Ask what all the ways in which an advisor can be paid. If you hear about multiple ways, you are likely talking to a dually registered advisor, not a fiduciary. Before you even reach out to an advisor, look at their webpage. If you see disclosure terminology that refers to “securities offered” or “insurance provided by”, you are not dealing with a fiduciary.
20-30% of CFP’s are fee-only fiduciaries. So, beware of designations. They may not be all that you think they are.

Understand the culture of the advisor and the firm. If the culture aligns with your values they relationship will likely be easy, not difficult and annoying.
Check the SEC’s website to see if any complaints have been filed against an advisor.And while you are there read the advisory firms Form ADV. If it seems like you are getting lost in the words, that might give you a clue that this firm may not be for you.