Author Topic: How to respectfully divorce my financial advisor?  (Read 3558 times)

Mutton Chop

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How to respectfully divorce my financial advisor?
« on: May 24, 2014, 06:26:32 PM »
Hi mustache team.

I have $35,000 in a traditional IRA in a managed account, where my advisor takes a 1% annual (lack of) management fee. I am 28 years old.

90% of the money is in SPY which any fool could do in an Schwab or Vanguard Brokerage acct.

Here's the interesting point: he refers clients to me from time to time, but I haven't made more than I get charged.

EDIT: I would like to do this as respectfully as possible. I see him almost weekly at various business functions.

I don't plan on trading or moving the money out of the SP500 for awhile, given my age.

I feel like I'm dumping a girlfriend.  He's a great guy but I'm paying him for nothing.
« Last Edit: May 24, 2014, 06:34:15 PM by debt_destroyer »

eman resu

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Re: How to divorce my financial advisor?
« Reply #1 on: May 24, 2014, 06:51:31 PM »
I went through this a few months back. I wasn't getting referrals from my guy, but am located in a small town and work in a job where having a popular FA (which he is) bad-mouthing me wouldn't have been ideal.  Sincerity worked great. I told him I had taken a real interest in handling my own money and that I wanted to be on the level and let him know that I wasn't going to be adding anything to my accounts with him. I left the door open to potential fee-only meetings to get his take on things (way) down the line, and he was more than happy to help me transfer my relatively small account at that point.  We see each other here and there and all is well.

It comes down personalities, I suppose.  The person I dealt with is a genuinely nice guy and really professional, so all I had to do was not be an asshole about things. So, selective honesty was the best policy:  focus on what you want to do for yourself, not what he doesn't do for you.

Good luck!   

quilter

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Re: How to respectfully divorce my financial advisor?
« Reply #2 on: May 24, 2014, 06:55:25 PM »
What about kindly being honest. " I've decided to move my money into vanguard  or schwab.  I am learning about investments as it is something I need to learn to manage myself .  I'm excited about taking this next step and managing my own money". If he presses you it is up to you how much you want to get into it. You could just be vague and say you haven't decided about what your asset allocation will be, you are doing research. It's your money after all.

jgrafton

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Re: How to respectfully divorce my financial advisor?
« Reply #3 on: May 24, 2014, 07:04:23 PM »
Hi debt_destroyer,

Going through a similar situation here.  I have a Roth IRA that's managed by a broker with Wells Fargo.  We've been with this broker for 10 years now and we have an emotional connection with them.  They've been with my wife and I from the beginning of our investment life, know the name of our child, and frequently asks about particular aspects of our lives. 

Unfortunately, the broker's incentive is to sell me funds which they get a commission on.  That's fine IF they can beat the market year after year and make up the 1% commission.  When I began to research sound investment advice online and learned that virtually no one actually beats the market over time, my investment calculus changed and I made the decision to not allow my emotional attachment dictate my investment future.

With my emotions put aside, I contacted Vanguard about transferring the account to get the ball rolling.  I'll likely face a difficult discussion with my former broker in the near future but it will be easier now that the winds of change are already blowing.

Good luck!

Frankies Girl

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Re: How to respectfully divorce my financial advisor?
« Reply #4 on: May 24, 2014, 07:20:58 PM »
I would just tell him (by email? Not sure how you communicate with him)  that you think you're ready and able to take over management of your investments on your own now, and thank him for his time and management up to this point and ask how to take over your accounts and stop the professional management. If you're leaving your account with the firm but taking it out of management, really, that's all you need to do. If you're speaking to him, just keep it light and express your excitement about learning about investment strategies and that you're really wanting to get "hands-on" now - it's not about you're firing him, it's about you gaining the confidence to do it yourself now (even if it really isn't).


Of course, if they guy starts giving you grief about it, that is a whole other story... I had one adviser that I ended up reporting to the parent company because he started hard-sell tactics pretty much as soon as I got my account (inherited several professional managed accounts with different investment companies - so pressuring me about giving him more money right after my dad died), and when I told him finally after a few months that I was planning self management, got told that this was equivalent to a doctor hearing about a patient wanting to operate on themselves... i.e. I was too unskilled and ignorant to do as what he did. He skirted the line to calling me stupid, but that was pretty shitty in my opinion, and I definitely didn't get that treatment from my other adviser - who was very encouraging and agreed index investing was a very solid path to good returns while minimizing costs and was very nice right from the start.

I did the switch to self manage by phone with my (good) adviser, but I don't have any worry about them referring or not referring clients. In any case, it was pretty simple - I called him up, told him that I'd finally gotten up to speed on investing and what I wanted to do, and was ready to take over my investments and get everything out of professional management. He walked me through setting up the self-managed accounts (they had different account numbers/setups depending on if it was pro or self managed, so we had to shift all my stuff into new accounts). Took about 2 days total start to finish for the funds to move over, but I didn't have to do anything other than the phone call and open the new accounts online (took about 15 minutes total for all of that).


blackomen

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Re: How to respectfully divorce my financial advisor?
« Reply #5 on: May 24, 2014, 07:26:07 PM »
There are countless effective asset allocations out there, each of which may seem like it's trivially easy to implement in your brokerage account.  Some examples:

100% Equities: 100% SPY.

60/40 Portfolio:

60% SPY, 40% TLT.

Permanent Portfolio:

25% TLT, 25% GLD, 25% SPY, 25% SHY

Others: http://whitecoatinvestor.com/150-portfolios-better-than-yours/

What are you expecting out of your adviser?  Most likely whatever allocation he recommends will seem "easy" to implement on your own but most likely he's worked through several combinations of these before finding the one that's best suited for you.  I recommend, even if you're planning to leave, at least to learn from him..  understand his thought process and why he picked the allocation you currently have.  Then learn some basics of investing, particularly asset allocation and see if his advice agrees with the principles.

lagniappe

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Re: How to respectfully divorce my financial advisor?
« Reply #6 on: May 24, 2014, 07:28:04 PM »
Debt Destroyer,

If I am understanding your post correctly, you pay him about $350 per year (1% of $35,000).  He refers clients to you, from whom you make less than $350 per year.

I would consider whether he has the potential to refer a more substantial future income stream my way.  If so, I might consider leaving the money there, but directing new funds to a self managed account.  As you said, it is a small business community and if it could affect your business it might be worth leaving it there. 

Having had this conversation with my former broker/ next door neighbor about an amount substantially larger a few years ago, I can tell you that being polite, respectful, but honest and firm makes the conversation go well.  My neighbor did not get angry, but he did try to guilt me a little.  At the end of the day, it is your money, and you get to decide what to do with it.  They are trained to try guilt, then false statistics, then undermining your confidence as tactics to retain your business.  Be confident in what you want, and don't leave the door open for "maybe".

One other tip - have the receiving fund family initiate the transfer, and sell any proprietary funds before the transfer goes through.  (My broker only transferred part of my account to Vanguard - it took six months to get all of my money out of the claws of his firm).

rmendpara

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Re: How to respectfully divorce my financial advisor?
« Reply #7 on: May 25, 2014, 10:45:10 AM »
Hi mustache team.

I have $35,000 in a traditional IRA in a managed account, where my advisor takes a 1% annual (lack of) management fee. I am 28 years old.

90% of the money is in SPY which any fool could do in an Schwab or Vanguard Brokerage acct.

Here's the interesting point: he refers clients to me from time to time, but I haven't made more than I get charged.

EDIT: I would like to do this as respectfully as possible. I see him almost weekly at various business functions.

I don't plan on trading or moving the money out of the SP500 for awhile, given my age.

I feel like I'm dumping a girlfriend.  He's a great guy but I'm paying him for nothing.

He refers clients to you that don't make you more than $350/yr? What exactly do you do for a living? Mowing lawns for someone 10 times should make you more than $350.

I'd say dump him, but obviously you have some hesitation about that.

Why not let him keep that account in perpetuity? After all, a good relationship (assuming keeping him in your network is valuable) is easily worth $350/yr.

Technically, an advisor cannot talk about their clients to other people. It goes against their ethics requirements, and in no way would that make him look good to anyone... unless he's just a d*uchebag.

In general, an advisor isn't worth the fees until you get to $200k+ in assets. Even then, by educating yourself you can replicate their work, but not everyone has a good understanding of investments and asset allocation. My sister is a doctor and doesn't really get it. For now, I do it all for her, but it will be a lot of work once her assets become substantial in 10+ years.

TomTX

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Re: How to respectfully divorce my financial advisor?
« Reply #8 on: May 25, 2014, 11:28:02 AM »

In general, an advisor isn't worth the fees until you get to $200k+ in assets. Even then, by educating yourself you can replicate their work, but not everyone has a good understanding of investments and asset allocation. My sister is a doctor and doesn't really get it. For now, I do it all for her, but it will be a lot of work once her assets become substantial in 10+ years.

If you're not trying to time the market or pick individual stocks or something, the investment time spent on her should be pretty damn small.

1) Set up initial asset allocation and how contributions will be allocated
2) Rebalance annually
3) Reconsider the asset allocation every 5 years or so.