Investing 101 — When to Change a Financial Adviser

by Jamie Dlugosch | March 15, 2012 3:00 am

It has been my experience that most individuals, once they make a financial decision, stick with it. No matter what the performance, people have a difficult time changing course. Wall Street loves that fact because financial advisers sometimes can make money despite poor performance.

In the business, they call this “sticky assets.” But if the same work that goes into hiring a professional adviser went into the evaluation of an adviser along the way, sticky assets would cease to exist.

While I do not believe in knee-jerk reactions, especially in relation to performance, I do think there are perfectly good reasons to change advisers. One of the biggest reasons — customer service — has nothing to do with performance.

If you find that your adviser has disappeared on you and is not available to answer difficult questions, it might be time to make a change. If an adviser is dismissive of your concerns, make a switch. I don’t want to be an alarmist, but if you look at those that previously perpetrated financial frauds, being dismissive of customer complaints is part of the modus operandi.

It simply is bad form to ignore a client’s concerns. You pay good money for your financial adviser’s time, and thus you deserve the best possible treatment. If you aren’t getting the best treatment, it is time to find a new adviser.

But don’t ignore performance. Bad performance certainly should be a catalyst for a change. But instead of a quick reaction, only make a switch after multiple quarters of performance that fail to meet your goals and objectives. This could be difficult if your relationship with your adviser is friendly. Nobody wants to fire a friend, but that’s exactly what you must do if your friend is failing you.

A final reason to change is too much success. This might be counterintuitive, but if your adviser is becoming a star, it might be time to move on. Adding too many clients puts pressure on the adviser. Time with you might be reduced as the adviser works with a glut of newer customers.

Even worse is if the adviser begins pawning your account off on a junior adviser. You deserve top-notch service — or at least the maintenance of the service you previously received — and if you don’t have access to the adviser because of time constraints, consider moving on. The timing might end up being perfect, as peak performance tends to go in cycles. Much like selling a stock at the top and buying at the low.

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