Ready For Retirement

How to Break Up with Your Financial Advisor

October 03, 2023 James Conole, CFP® Episode 183
Ready For Retirement
How to Break Up with Your Financial Advisor
Show Notes Transcript Chapter Markers

In this episode James explores signs that may indicate it's time to move on from a current financial advisor and discusses the professional and respectful ways to handle this transition. There are three core aspects to consider when contemplating the change:

Deciding to Leave:
The first step involves recognizing signs that it may be time to move on. 

Telling Your Advisor:
James provides two scripts for notifying your financial advisor about your decision.

Handling Logistics:
After the decision to switch advisors is made, there are several logistical considerations.

James highlights that making the decision to switch advisors can be emotionally challenging, but ultimately, it's a crucial step in securing your financial future.

Questions Answered:
How do you decide if it's time to leave your financial advisor?
What's the best way to tell them that you're leaving?
How do you handle the logistics? 

Show notes links:
When Should You Work with a Financial Advisor?
https://www.youtube.com/watch?v=1V1X-dovlF4

Script: Break up with your Financial Advisor
https://docs.google.com/document/d/1IwYM5DDcvm0FEtkc99Lf9sy840wmGfhLm62-o7NmMpg/edit

Timestamps:
0:00 Intro
1:18 How to decide
7:00 How to tell them
8:10 Script 1
9:09 Script 2
11:03 Script 3
15:28 The logistics
17:54 Outro


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Speaker 1:

Have you ever wondered if it's time to fire your financial advisor? Maybe you have, but you're not sure how to do it politely or respectfully. Or maybe you don't even know what that process looks like without making a mess of all your different accounts. Well, in this episode we're going to discuss the signs that it's time to move on from your financial advisor, and how to do it in a professional and respectful way. We'll also talk about what to look for in a new advisor and how to make that transition as smooth as possible. So, whether you're feeling like you're not getting the advice you need, or if you're simply not comfortable with your advisor style, this episode is for you and I'm going to give you the tools and knowledge you need to make a confident decision about your financial future. This is another episode of Ready for Retirement. I'm your host, james Cannell, and I'm here to teach you how to get the most out of life with your money. And now on to the episode. If you're considering breaking up or leaving your financial advisor to transfer elsewhere, there's really three core things that you need to be aware of or be thinking through as you make that decision. Number one how do you decide if it's even time to leave your financial advisor. So we'll address that. Number two what's the best way to tell them that you're leaving? And then number three how do you actually handle the logistics? In some cases, it may be simple. In other cases there may be some details that you need to be aware of. So that's what we're going to focus today's episode on. Now, to start, how do you decide? How do you know if it's time to leave your financial advisor? Some of you listening may say James, I just know it's time. This is a feeling I've been having for some time now and I just need to make the move into it. Other of us of you might be thinking you know, I don't really know. I feel like there's some services, maybe they're a nice guy or nice gal, but I just don't feel like something's completely there or something's missing. Well, to me, there's some telltale signs that it is time to move on from your financial advisor. I actually recorded a video of this on YouTube. The video is called when Should you Work With a Financial Advisor, but a large part of that video is actually when Should you Change or even Fire your financial advisor. I'm going to include a link to that on the show notes. So if you're listening to this on Apple or Spotify or whatever it is, check out the show notes. There's going to be a link to that YouTube video where I flushed that out much more detail. Here's just a summary, though, a few basic things. If any time you ask your financial advisor tax question, they say ask your CPA, it might be time to move on from your financial advisor. If your financial advisor is not providing tax advice and you're preparing or already in retirement, you're missing a huge component of what a good financial plan should do. Another reason is if you don't hear from them ever there's no proactive reachouts to schedule meetings, there's no informative emails to keep you up to date on various things, there's no resources like podcasts or videos that they're making. If you're not getting some type of consistent feedback or communication from them, it might be time to move on. One key role of a financial advisor is to keep you informed and to keep you updated and educated to ensure that you're constantly making the best financial decisions for you. Another reason is if you have a whole bunch of planning points, maybe do meet with your financial advisor. They say this is what we need to do. We need to do X, y and Z, and then X, y and Z have a tendency to start falling through the cracks. You need to have someone that's proactive in doing things, so if something says it's going to get done, you have full confidence that that's actually being implemented on your behalf. So I go through things like that and more in the video. So again, check that out in the show notes, where I walk through that in more detail and give you other examples. But the first thing that you need to do is decide is it time to move on from my financial advisor? And here's the thing that I encourage people to do. And actually, before I jump into that high level, some people might see this podcast and say, well, that's kind of a silly episode. How to break up with your financial advisor. You just do it. Well, it may seem that way, it may seem fully rational, but I can't tell you how many people I've spoken with, who. They talked to us. They knew that what we offered was superior to what they're currently getting. They knew the service was going to be better. They knew the planning opportunities were going to be broader, but they couldn't bring themselves to leave their existing advisor and that's a challenge. For a lot of people, it's like breaking up with someone. Oftentimes, this is someone you either know personally or have gotten to know over years of working with them. It's not easy simply to leave them. So here's what I encourage people to do in many different areas of their life, not just when it comes to their conversations or discussions with their financial advisor is try to make decisions as your future self, as opposed to your current self. There's an author named Benjamin Hardy who I really like, and he's an author that talks a lot about this of how can we make decisions to the framework of your future self, because there's always this tension between who you are today and who you're going to be in the future, and oftentimes things that we know are going to be good for us in the long term that could be working out, that could be saving for retirement, that could be breaking up with your financial advisor we don't do them, and it's because, from a psychological perspective, we view our future selves as a completely different person than our current selves, and so when we're thinking of these things, we think, okay, well, that's good for future me, but future me is almost an entirely different person. And because that disconnect because we don't fully connect with who our future self is. We make decisions in which we prioritize our current comfort. We make decisions that prioritize not rocking the boat or doing anything scary today, even if we know it's better for our future selves. So if we don't check this, then this keeps us in our comfort zone. It keeps us doing things that bring us comfort and avoiding the things that bring us discomfort. Now, firing your financial advisor isn't going to be a source of a lot of psychological papers, but the principle applies. Like I said, I've spoken with so many people who couldn't move forward with an approach they knew was better for them because it was too difficult for their current selves to do so, because it required discomfort, even though they knew their future self would benefit greatly by some of the things that we're talking about doing. Hey everyone, it's me again for the disclaimer. Please be smart about this. Before doing anything, please be sure to consult with your tax planner or financial planner. Nothing in this podcast should be construed as investment, tax, legal or other financial advice. It is for informational purposes only. Another quote that I like about this is Naval Ravikant. He has a quote that says and he's talking about decisions in general. But he says, quote if you're 50-50 about a decision, then you're overweighing the comfort of staying where you are, end quote. In other words, if you think you're 50-50, you're really not 50-50. You're lying to yourself and your brain is tricking you into saying you know what, this is just as good. This current solution is just as good as the alternative. It's kind of 50-50. No, your brain is lying. It might be more like a 40-60 or 30-70, but your brain is tricking you and prioritizing current comfort as opposed to doing what's best for your future self. So if we can recognize that about our decisions and we can prioritize the thing that's going to be better for future us as opposed to current us, we're going to make better decisions as a whole. So not to get too psychological about what seems like a very simple topic, but these same principles apply with this type of decision, which is difficult for many people. So once you know that you're going to fire your financial advisor, how do you actually go about telling them? Well, in this case I would say it depends a lot on the relationship, because in most cases you don't actually have to tell them. Your advisor, in most cases, doesn't control your account and you can move it at any time. So, for example, if you have a financial advisor and they use Charles Schwab as a custodian and you say, you know what, I really just don't need a financial advisor anymore, well, you could simply remove your financial advisor from the account and it becomes yours. Or maybe you want to transfer to a different financial advisor who uses fidelity as a custodian? Well, your current financial advisor at Fidelity, they could sign the paperwork. Or have you sign the paperwork, I should say, to initiate the transfer. That just gets sent to Schwab's back office. Then all your assets move in kind to Fidelity, assuming they're non-proprietary assets. So there's really not a need to. From a logistical standpoint, it's more of a respect thing or a hey, thank you for your help over the years, type of a thing that you do to be polite and notify, but it's not a requirement. So, that being said, there's not a rule book for how you have to notify your advisor. It more comes down to what your relationship with them is like and I would say, in general, there's three options. Number one if you're firing your advisor and saying work with another advisor or just doing things on your own, first option is don't tell them and just do the transfer. So this is really, if you have no relationship with your advisor, or if you know they're likely to be unpleasant if you do tell them, or there's just something that you don't want to communicate with them about, maybe something bad happened Well, you don't have to tell them. You can simply transfer. So option number one is just move away, set up new account somewhere else and transfer your assets and kind over. Or in the case, like I mentioned before, maybe your accounts are already at Schwab or Fidelity or a custodian like that, you can simply request that your advisor be removed from the account. Your advisor never owns the account. You always own the account, and when you're working with an advisor, they have something called limited power of attorney to make trades and manage the account on your behalf, but you're the owner. So anytime you could go to that institution and simply have your advisor removed and then the account simply becomes yours. So that's option number one don't tell them and just transfer. Number two is you could send them an email. Now I'm actually going to provide some scripts in just a second. I'll read them off to you, but I'm also going to include a link to these just a Google drive folder that's in the show notes that you can access. You can send them an email just to notify them. Hey, thank you for everything. I found a new advisor I'm going to transfer. And then the third option and this is if you tend to have a much closer relationship with them or just feel be the most respectful thing to do, is you could give them a call, call them, say thank you for everything, but we're moving in a different direction. You can even use the email scripts that I'm providing in the link below as a general kind of talking points and customize them to your specific situation. But a phone call just to notify them and say thank you and I'm moving on. So I'm going to read to you these scripts. These are available, so go to the show notes and you can just download these and use them and customize them as needed. But here's the scripts that I have that I send prospects occasionally when they're deciding to work with us but don't know exactly how to break up with their existing advisor. So there's two scripts here, and that's not to say there's only two reasons to break up with your current financial advisor, but the first of these scripts is based upon a prospect, maybe wanting to go to a financial advisor that's offering more services. So the script is this dear financial advisor's name, I hope you are well. I'm writing to you today to let you know that I've decided to work with a new financial advisor. I want to start by thanking you for all of your help over the years. You've been a valuable asset to us and will be forever grateful for your guidance and expertise. As you know, we're approaching retirement. This is a big change for us and we're looking for a financial advisor who can provide more comprehensive services that meet our unique needs as we shift from our accumulation phase into retirement. We're specifically looking for an advisor who can help with the following Number one tax strategies. I want to make sure we're minimizing our lifetime tax payments through a coordinated tax strategy. Number two efficient spending strategies. We want to make sure that we're drawing down our portfolio in a way that maximizes our retirement income. Number three an overall financial review to ensure that we feel a hundred percent confident in our retirement decisions. We've done a lot of research and we've engaged a new financial advisor who we found to be a good fit for us. They'll be initiating transfers from insert your financial institution name to complete this process. Again, thank you for all of your help over the years. We wish you all the best in the future. End of the script. Now, what you want to do, you don't have to use these words exactly, but the general approach is thank you, advisor, for your help and your services over the years. Make it very clear. We've made our decision and we're going to go in a different direction. Here's the reasons we're doing so. Again, thank you for your services. What you want to avoid doing is leave it open or leave it ambiguous or a little bit vague of are you transferring? Are you not transferring? Are you trying to ask if we can talk about it? Make it very clear, but do so in a respectful manner. So that's the first script. The second script is more focused on wanting a team that's going to maybe provide more longevity for you. So a lot of people they come to us and say, hey, we actually don't mind our advisor. We think that James, you and Root will provide better services, but our current advisor is fine. It's just. The bigger reason is our current advisor might not be retiring that much later than we retire, so we don't want to have to make this decision to find a new advisor in five years or 10 years. We want to know that we're working with a team that's going to be with us through the duration of our retirement, and we want to do it now, when we can make the decision that's best for us, when we have our health and our mental faculties in the capacity to make the right decision. So here's that script. Dear financial advisor, I'm writing to you today to let you know we've decided to change financial advisors. I know this may come as a surprise, but we've given it a lot of thought and we believe it's the best decision for us at this time. We want to start by thanking you for all of your help over the years. You've been a valuable asset to us and we have nothing but gratitude for your guidance and expertise. As you know, we are retiring soon. We've decided that we want to work with a financial advisor who is younger than us, but we don't have to make the decision to change advisors later in life, when you may ultimately decide to retire. We've done a lot of research and we've engaged a new financial advisor who we found to be a good fit for us. They're in contact with Insert financial institution name to make the necessary changes on our accounts. Again, thank you for all your help over the years. We wish you all the best in the future. So, as you can see again, this is very clear, not ambiguous. We've clearly made our decision. But we want to thank you for the time that you've put into our relationship over the years. And this is for people who realize they're smart about this that your financial advisor is not going to work forever. Now, when you're looking at this, let's say your advisor is 60 and you're 65, maybe they do work another seven, eight years, but at that point they're either going to sell the business to another advisor who you may or may not have a relationship with they may sell to a private equity firm, so you almost certainly wouldn't have a relationship with whatever advisor you get assigned with at that point or they may simply just disband the business and that's pretty rare, but some advisors simply coast until they kind of gradually lose clients and then they finally just say the business is shutting down. So as you look at those options, unless there's a really strong, clear internal succession plan in place, you may not have much say over who your next advisor is in seven, eight, nine years once your current advisor retires. So a lot of people want to get ahead of that. They either want to know from their advisor who exactly am I going to be working with when you retire, or they want to make the decision now to say who's the right team for us, not just for the next five years or even 10 years, but next 20, 30 plus years. So those scripts are in the show notes and those are templates that you can use as you're having the conversation. So, to summarize, step number one is how do you know when it's time to leave your advisor? Step number two is how do you actually have that conversation or actually implement that leave from your advisor? Step number three is what do you actually do logistically? Well, number one notify them. You're terminating the relationship, first and foremost. But number two, the second thing in your new advisor should be able to help you with this, because sometimes it's awkward to do it with the advisor that you just fired. But your new advisor can help you understand. Are there any proprietary funds that you might hold with your current advisor that would have any trouble transferring to a new institution? Your new advisor should be able to tell you that In many cases the answer is no. Everything just comes over very easily. But in some cases they might say, hey, you need to sell that fund or this fund can't transfer, this needs to be liquidated first. But they can walk you through that process. The step three, the third part of this, is are there any life insurance contracts or annuities or non managed accounts that you also need to make sure transfer? Let's keep this really simple and assume you have one IRA that you had an advisor managing and you're going to transfer to a new financial advisor. So you open up a new IRA at your new financial advisors institution, you transfer over your old IRA, anything you're good until you realize, oh, my goodness, the old advisor also sold me a life insurance policy at some point and oh, you know what I forgot. But the old advisor, there's an annuity contract I have through them or there's some other type of product that I have through them. So just doing a full checklist to see are there other products that that advisor is listed as the advisor on, and do those also need to transfer? Not necessarily change them, but simply have a new advisor of record or new institution of record on them to ensure they can still be tracked for you. And then the fourth thing that you would do is this more of a privacy thing is many advisors have portals, myself included. So when clients are working with us, they have a portal they can log into. They can see all their accounts, the institutions that we're managing. They can also connect outside accounts. So maybe they have a 401k through work or maybe they have kind of like a play money fund on the side, or maybe they have whatever the case might be, a mortgage linked in, bank accounts linked in. Well, you probably don't want your old advisor that you fired to still have access to all those different things. So go into your portal if you're going to be transferring away from the advisor, unlink or delete all of your connections and then request that the advisor deletes your portal as well. So making sure all history is taken care of, everything's deleted, so you don't have any live links that are continuing to go into your old advisor's program even though you're no longer with them. So those are the basic steps. As easy as it might sound, sometimes there's some difficulties emotionally leaving your advisor and there are also some logistical things that you need to make sure you're taken care of. But if you can follow the steps that we laid out today, you should be in a good position. But many times, the hardest part about moving in the right direction you know is right for you is just making that difficult decision to part ways with someone who is with you along the way. But what I encourage everyone to do is look at your finances. This isn't just an IRA, this isn't just a brokerage account. This isn't just a Roth. This is really your financial future and your financial security. What decision would future you make when it comes to doing what's best for you? So that is it for today's episode. Hope you like that. Hope that was helpful. If you're enjoying this podcast, I always appreciate it when you leave reviews. It does help more people to find this podcast so more people can get valuable information as they're preparing for their retirement, and also check us out on YouTube. The channel name is James Cannell Cannell C-O-N-O-L-E. Search for that on YouTube where you'll find this episode as well as many other videos that help you to create a more secure retirement so you can ultimately get the most out of life with your money. That's it for today. Thank you for listening and I'll see you all next time. Thank you for listening to another episode of the Ready for Retirement podcast. If you want to see how Root Financial can help you implement the techniques I discussed in this podcast, then go to rootfinancialpartnerscom and click Start here, where you can schedule a call to one of our advisors. We work with clients all over the country and we love the opportunity to speak with you about your goals and how we might be able to help. And please remember nothing we discuss in this podcast is intended to serve as advice. You should always consult a financial, legal or tax professional who's familiar with your unique circumstances before making any financial decisions.

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