What to Do If Your Financial Advisor’s Advice Isn’t Working for You
No two people think or work exactly the same, and when you team up with a financial advisor, the occasional disagreement is perfectly normal. At the end of the day, both of you are trying to bring different perspectives to the table. But if you constantly disagree with their advice or feel stressed or unheard, you may need a new course of action. While minor disagreements here and there are normal, anything that costs you your peace of mind may not be right.
When a financial advisor‘s advice fails, it might be time to step back and consider your options. This article can help you understand what to do when your financial advisor isn’t giving good advice.
Table of Contents
What do you do if a financial advisor is not helping you anymore?
1. Identify the things you are not satisfied with
When you start feeling that your financial advisor isn’t giving good advice, the first step is to pinpoint exactly what is bothering you. Sometimes, it is not always obvious. Financial planning is not a straight road, and results can often take time to show. You might not immediately recognize that the financial advice you are following is out of sync with your situation. This is why it is important to pause and reflect on what is making you uneasy.
You can start by looking for patterns. For instance, try to understand if your financial advisor has been consistently brushing aside your ideas or concerns. You can also check if you are hesitant to follow their advice. This may not always be because you fear risk, but sometimes it can also be because their advice simply does not sit well with your financial goals. Maybe you feel like your personal values or priorities are not being taken seriously. This can happen if a financial advisor recommends investing in the stocks of a company whose core principles or areas of operation may not align with your preferences. Despite the stock being potentially profitable, you may not want to invest in it due to your personal beliefs. Financial planning should take these factors into consideration and not be a one-sided endeavor.
It is also important to think about how their financial advice makes you feel emotionally and mentally. Are you feeling anxious or stressed every time you try to follow their recommendations? For example, if your financial advisor is encouraging you to maximize your contributions to your 401(k) or an Individual Retirement Account (IRA) while you are struggling to pay your monthly bills or maintain enough liquidity for financial emergencies, that is a real concern. Your financial plan should not keep you worrying and struggling to manage basic expenses. Also, notice whether the financial advisor is prioritizing your long-term goals at the cost of your short-term well-being. Of course, saving for the future is important, but not at the expense of making your present life feel impossible. A financial advisor should be able to help you balance both. You may also not like working with a financial advisor whose fee model does not fit well within your financial capacity. This can create unnecessary stress and make it harder to manage your finances.
Take some time to write down the specific signs your financial advisor’s advice isn’t working. It could be the strategy, the communication style, the risk level, or simply the feeling that you are not being heard. This can help you raise these concerns with your financial advisor and find a way forward.
2. Speak to your financial advisor about the things you do not like
Once you have identified and written down the specific issues that are bothering you, the next step is to have an honest conversation with your advisor. Learning how to handle a financial advisor who isn’t working for you is an important part of protecting your financial well-being. It might feel a little awkward at first, but open and honest communication can lead to a healthy professional relationship. Financial advisors work with clients who have very different personalities, goals, and ways of handling money. Even the most experienced financial advisor cannot always read your mind, which is why it is important to express clearly what is not working for you. You can start the conversation calmly and approach it as feedback rather than criticism. See it as a chance to get on the same page with your financial advisor. You can share the specific points that are making you uncomfortable. This could be the strategies suggested, the level of risk reflected in your portfolio, or the way they have been communicating with you. Explain how their financial advice makes you feel and what you would like to see changed. Many financial advisors will appreciate openness and will work to adjust their approach once they better understand a client’s perspective.
You must pay attention to how your financial advisor responds to your feedback. Ideally, they should not dismiss your concerns. If the financial advisor listens carefully and is willing to work with you to find a solution that makes you feel more comfortable, you can continue working with them. In some cases, you might still find that you and your financial advisor are not aligned, even after sharing your concerns. They may be unwilling to adjust their recommendations, or their point of view could simply be different than yours. If that happens, you may need to look for a new financial advisor who is a better fit for you.
3. Have a calm and respectful conversation with your financial advisor about wanting to switch
If you have already discussed your concerns and still feel like things are not improving, it might be time to consider switching to a new financial advisor. There is no benefit in sticking with someone whose financial advice does not suit your needs. Continuing with an advisor who is not the right fit can cost you more than just professional fees. It can lead to poor returns, stress, and goals that remain out of reach. Changing financial advisors can feel uncomfortable at first. However, it is important to remember that financial advising is a professional service, and professional disagreements are a normal part of life. Financial advisors are used to clients making changes, and a good one will understand your need to prioritize what is best for you.
When you make the decision to switch, remember to approach the conversation calmly and respectfully. Instead of placing blame or pointing fingers, simply explain that you feel it is time to move in a different direction and that you would like to explore working with another financial advisor who better matches your current needs and expectations. You can also acknowledge the effort they have put in and thank them for their time. Give them notice according to your agreement or any terms you have in place. This allows them to plan ahead, and it shows professionalism on your part as well. In some cases, your current financial advisor may even recommend another advisor within the same firm who might be a better fit for you. This can make the transition smoother and allow you to avoid having to research too much on your own.
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4. Settle any outstanding fees and consider tax implications
After you have communicated your decision to end the relationship with your financial advisor, it is essential to address any outstanding fees or pending payments. Before you move forward, take the time to review your agreement and ensure that all your dues are cleared. Leaving behind unpaid fees can delay the transfer of your accounts and records to your next financial advisor.
Apart from the fees, you should also pay attention to any assets your current financial advisor may be managing on your behalf. If they are holding investments or funds in accounts under their management, you will need to arrange for a proper transfer, either to your personal accounts or directly to your new financial advisor. Mishandling such a transfer could result in unexpected tax consequences, especially if you are dealing with retirement accounts like IRAs, 401(k)s, or other tax-advantaged investments. It is always wise to double-check the tax implications before initiating any account movements to avoid accidentally triggering penalties or taxes. Even when done accidentally, cashing out funds can be considered a premature withdrawal. So, make sure to tread carefully and consider consulting a tax professional during this transition, if needed.
5. Evaluate your financial situation and goals before you hire a new financial advisor
Before you jump into hiring a new financial advisor, make sure you get a clear understanding of your situation and expectations. If your financial goals were not met with your previous advisor, the responsibility may not rest entirely on their shoulders. Sometimes, miscommunication or a lack of clarity on your part can also be the reason. Therefore, it is important to use this transition period to understand where things might have gone wrong and what you can do differently this time.
You can start by reassessing your financial goals. Your life may have changed since you last hired an advisor. You may have a new job or a new family member, or your priorities may have simply shifted, which can alter what you want from your finances. Take time to write down your current goals clearly. For instance, you may want to retire earlier or focus more on building an emergency fund. Next, take a good look at your financial situation today. Review your income, expenses, assets, debts, and investment budget. Also, consider your present risk tolerance, as it may have shifted over time. This self-assessment helps you communicate more effectively with your new financial advisor and helps them tailor a financial plan that truly aligns with your needs. It also helps you avoid repeating past mistakes and gives your next financial advisor a much better chance of guiding you successfully.
6. Hire a new financial advisor after careful evaluation
Finding a new financial advisor could feel overwhelming, especially if your past experience left you disappointed. However, this is also your chance to get it right by taking the time to carefully evaluate the next professional before making a decision. Rushing into a new advisory relationship could lead to the same issues you faced before, so make sure to put in the effort upfront.
It is important to research advisors who specialize in clients with financial backgrounds similar to yours. Every financial advisor has a different area of expertise, like wealth accumulation, retirement planning, or debt management. It is advised to hire someone who not only has the right qualifications and licenses but also works with clients who share goals and financial profiles similar to yours. This way, they may be more likely to understand your needs and can offer practical, tailored financial advice to your goals.
Speaking to multiple financial advisors before selecting one is also highly recommended. You can set up a meeting with multiple advisors to gauge their personalities. This can help you compare different individuals and select the one that aligns with your needs the best. Consider how comfortable and heard they make you feel. Pay attention to how they address your concerns. You must review their fee structure as well. If high fees were one of the reasons you felt unsatisfied in the past, take this opportunity to discuss costs upfront. Financial advisors typically charge either by the hour, a flat fee, or a percentage of Assets under Management (AUM). Understand exactly what and how you will be paying them and decide whether it fits your budget.
To conclude
There is no reason to stick with an advisor who is giving you bad financial advice. The sooner you make the necessary changes, the better it can be for your financial health and long-term goals. Sticking with a financial advisor who is not working for you not only wastes money on fees but can also hold back your financial growth and peace of mind. So, do not let yourself stay stuck in an unproductive situation out of hesitation. It is also important not to let one disappointing experience stop you from hiring a new financial advisor in the future. When given by the right professional, good financial advice can make a significant difference in your life. So, make an effort to find a new advisor who can help you in your financial endeavors.
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