I have been dumped. I’ve also been the other man. So go the dynamics of a relationship with a financial adviser.
While I no longer have clients (they all broke up with me), the relationship transition between an adviser and a client still sticks in my mind as a visceral one. Did trust disappear? Did goals change? Does a reason for change even have to exist?
Sure, there are lots of parallels to be drawn between breaking up with your financial adviser and breaking up with a love interest. But there is one major difference: money. Well, hopefully that’s the major difference.
Your financial adviser no longer will count you as an income source. While he/she may try to argue that their disappointment in the breakup isn’t about the money, it is. Feelings don’t pay the bills.
There’s no easy way to tell someone they failed you. That’s what happened, right? You had an expectation; the expectation wasn’t met.
The process of leaving an adviser has two parts: transferring your accounts to their new destination, and your adviser learning you are leaving. Once you’ve decided to end the relationship, here are the three primary ways to get started.
There’s a lot of different paperwork. The most common form involved in changing advisers is called an ACAT. There are full ACATs and partial ACATs. The form transfers your assets to the new account. Sometimes this requires you liquidate your current investments prior to the transfer happening, but most of the time you can transfer your assets as is. Your old adviser will find out you left when the transfer paperwork comes to his or her attention to claim your accounts. This is the preferred method if the relationship has gotten beyond weird. There’s no reason to have an avoidable confrontation, especially if the relationship has turned contentious.
I understand you may not want to tell your adviser you are leaving. But letting your adviser know is the right thing to do. A call or email will do. Thank them for their service, and let them know you are going in a different direction. They may ask why, but they probably already know the answer.
Here are some reasonable reasons to leave an adviser:
In all of these instances, it’s not out of the question to let your adviser know why you are leaving. Your goal isn’t to get into a debate, it’s to end the relationship and move on.
In the rare instance you feel the need to create a paper trail, call the firm’s customer service. There are instances in which an adviser’s conduct needs to be reported. By calling the firm’s customer service department directly, you are likely to have your conversation recorded. This allows you to inform the firm of any suspected wrongdoing.
As you consider what to say, know that there’s a difference between your investments lagging in performance to the market and wrongdoing. Don’t blow the whistle of wrongdoing just because you don’t understand how the market works. However, if you’ve promised something in regards to performance, you need to report that. But there’s a big difference between promises and hypotheticals.
Be aware: You can’t undue a complaint. In the financial world, a formal complaint is a REALLY big deal. It will go on your adviser’s permanent record. None of the reasonable reasons for leaving an adviser warrant an actual complaint. If you feel like you were lied to, or fraud is occurring, report it to their firm and report it to FINRA. Otherwise, talk directly with your adviser.
Some advisers are just better than others. When I was in the financial business, I had people leave me for better advisers. I was OK with that, and I’m still OK with that. Depending on where your financial person works, they may be limited in the products and services they can offer you. This isn’t their fault.
Some financial professionals may not be able to offer certain services based on what their company allows or doesn’t allow. And while unrealistic industry ethicists may suggest that a financial professional switch firms if he/she can’t offer the absolute best solution, I find this expectation to be out of touch.
A financial professional is not likely to leave the firm they are working for because they can’t offer a specific solution or their pricing isn’t the most competitive in the industry. Advisers risk throwing away their entire books of business if they switch firms, due to noncompete agreements. Your adviser may simply be doing the absolute best he/she can under the restraints of his/her current firm. That has nothing to do with you.
All of this is to say that if you choose to leave your adviser because of performance or pricing issues, it might not actually be that individual’s fault. It’s not your fault either. The fault lies in the service offerings made available by the adviser’s firm.
I’ve always thought of investment advisers like prizefighters. The good ones know they’re good, and they typically think they know more than their competitors. This can lead to some weird side effects. Almost any adviser would look at your current portfolio and tell you how they would do it differently. That’s not reason enough to switch advisers. Give me 100 advisers, and I’ll show you 100 different investment strategies. Different isn’t better. Different is just different.
Peter Dunn is an author, speaker and radio host, and he has a free podcast: “Million Dollar Plan.” Have a question about money? Email him at AskPete@petetheplanner.com. The views and opinions expressed in this column are the author’s and do not necessarily reflect those of USA TODAY.