It’s great when a financial advisor is the kind you can use all of your life; when he or she has the knowledge and experience to manage your investments for all kinds of markets, as well as through the ups and downs of your life and career. But that’s not always the case, and sometimes you have to make a change.
If you do, make the change only after carefully considering the reasons you have been with your current financial advisor, based on facts and not emotions. Good financial advisors are not easy to find, so you want to proceed with caution, and do so only after you’re absolutely certain it’s the right course of action.
With this in mind, when’s the best time to find a new financial advisor?
When You’re Not Happy With the One You Have
This is the most basic reason why you would make a change regarding any professional you are working with in your life. Even if you’ve been working with the same financial advisor for several years, there may come a time when you need to part ways.
Here are some examples of those situations:
- Your portfolio is underperforming the market, and has been for a while.
- You have increasing philosophical issues with the advisor.
- Your advisor seems out of touch with your needs and concerns.
- The advice and strategies given seem canned (the “one size fits all” strategy used for other clients).
- The advice doesn’t seem to have merit — i.e. you could get better performance in a combination of no-load mutual funds.
- You feel the diversification strategy implemented isn’t adequate for the current or expected future market.
- You no longer believe your financial advisor is worth the money you’re paying for his or her services.
If you make a change based on any of the scenarios above, make sure it’s the result of consistent patterns, and not a one-time event. A bad quarter or two doesn’t make a financial advisor bad.
When You Come Into a Financial Windfall
The amount of money under management is often a factor in the use of a particular financial advisor. For example, the financial advisor you currently have may have a long successful history of working with clients in the $100,000-$500,000 portfolio range.
But if you come into a $2 million inheritance, it may be time to change to a financial advisor who has more experience — and a longer track record — of working with portfolios of this size.
A much larger portfolio size may result in significant tax changes your current financial advisor is not entirely familiar with. Also, a larger investment portfolio may cause you to change your investment outlook, which may require you to bring in a new advisor.
When the Winds of Change are Blowing Through the Financial Universe
Some financial advisors are more successful in certain types of markets. For example, your current financial advisor may have done very well for you during the long bull market. But what was his or her track record in the last couple downturns?
If you suspect the market is heading for a fall, this may become an especially relevant issue. Some financial advisors do especially well on the upside, but give it back going down — often precisely because they did so well in a rising market.
Even more important, if your financial advisor is relatively new to the profession, there’s a possibility he or she may never have experienced a prolonged bear market. Just because the advisor did well in a rising market doesn’t mean he or she will be able to properly navigate a decline. Growing money is one skill set; preserving it is an entirely different one.
On the flipside, if the market has been in a bear cycle for the past couple of years, and seems poised to recover, you may have to change financial advisors if you suspect your current advisor has become too conservative. Once again, the strategies that work so well in a bear market could work against you when the tide turns.
When You Make a Geographic Move
This might depend on your own personal comfort level more than anything else. Some people are perfectly okay working with a financial advisor online or over the phone. But others prefer some sort of direct contact. If you live in Florida, where your financial advisor lives, and make a move to California, it may be time for a change of financial advisor if personal contact is important to you.
This may be necessary for more than reasons related to personal contact. The tax environment in California is very different from Florida — California has one of the highest income tax rates in the country, while Florida has no income tax at all. You may want to change to a financial advisor in California, who is familiar with California income taxes since they may/will have an affect on your investments and investment strategy.
Upon a Major Career Shift
Sometimes there’s nothing wrong with your current financial advisor — it’s just that things change, and sometimes you’re what’s changed. A major shift in your career is one such change that can send you out looking for a new financial advisor. There are a number of reasons when and why this might happen.
Some financial advisors are career-centric. That is, they tend to work primarily with people who are employed in certain career fields. It could be doctors, lawyers, small business owners, IT professionals, or even government workers. If you’re an IT professional, but you’re moving into being a small business owner, you might feel more comfortable with a financial planner who works primarily with small business owners.
This will be especially important if your current financial planner has a client list full of IT professionals. Your changing career necessitates a change in financial advisors. After all, some professions may allow for a more aggressive investment strategy, while others are better suited to a more conservative one.
If you do decide you want to make a change in financial advisors, consider all of the relevant facts first, and be sure you’re doing the right thing. A financial advisor is one of the closest and most important professionals you’ll have in your life, and finding a good one isn’t easy.