changing financial advisors

[Luke Warm]

we've been going to a financial advisor for about 10 years now. my wife has been wondering about changing advisors due to some possibly wrong advice we were given. is it a huge pain to change? would it be better to retain someone to look over our existing accounts? is it possible to find someone that won't badmouth the other advisor just to get our business? thanks.

[Rezdent]

I think a lot (most?) people on this forum prefer to manage their own accounts, and avoid financial advisors.
If your want to use an advisor, I strongly recommend going to the trouble of finding one that is "fee-only", that you pay straight up and has no commissions or ties to the investments they are recommending.

[Capsu78]

1. Set up a Vanguard account
2. Have Vanguard initiate getting your funds transfer
3. Wait for the panicky phone call from your current advisor...listen to nothing they say...repeat after me "We are moving in another direction...We are moving in another direction"
4. Find a Fee only FA close to you:  http://www.napfa.org/
5. Interview as few or as many as you wish.
6. I bought 6 hours which included 2 hours of interview at both ends.  Received a comprehensive review of my current portfolio, a proposed portfolio, SS and pension claiming strategies.
7. Set up a portfolio that can fit on 1/2 of a sheet of paper.

PS THE most painfully awkward part of the above process for me was "breaking up" with the existing advisor... "You won't find anybody in this town as good as me!" was his parting comment as I headed for his exit for the last time.

[ysette9]

The thought of doing everything on your own can be intimidating at first. I know my husband wanted the warm fuzzy feeling of having a professional review everything for us. We have been through multiple advising sessions with multiple companies (USAA several times, Vanguard, Personal Capital). Sometimes the advisers brought up good points (i.e. Vanguard mentioned that we should be holding bonds in a tax-advantaged account) but overall I am happier doing it myself.

Why? Because over time as I educated myself (through this great forum as well as blogs and places like Bogleheads wiki) I realized that the advisers had silly and self-serving stuff baked into their advice. It's cheesy to say that no one will care about your money as much as you do, but it is very true. You REALLY need to understand what is going on with your money. If you don't understand it, don't do it. You can accomplish a lot by following a lazy fund portfolio recommended by Bogleheads. Advisers were helpful to us in the beginning to take a holistic look and make sure we had enough insurance, had a will in place, got started with an IRA. Once you have those basics down though, you likely can do better by yourself unless you have a complex situation.

That said, there are a lot of really smart people on this forum. Think about posting a case study and getting the benefit of multiple (free!) financial advisers. :)

[katstache92]

I would also recommend looking for a "fee-only" advisor.  As someone else mentioned, they are not getting kickbacks or some kind of payment for selling you a certain type of investment.  I believe a "fee-only" advisor has a fiduciary duty to you.

I dumped my old financial advisor that worked at a bank.  Don't go in wishy washy.  You know what you want.  You know what is best for you.  I only had to see him face to face because I needed to recharacterize part of my IRA before I closed the account (I procrastinated on taxes.)  You shouldn't even really need to see or talk to him again.  The new advisor should be able to transfer the money, assuming you have all of the account info.

Some advisors will offer a free consultation. This is so they can get to know you and your situation but it is also so you can get to know them.  Take advantage of this time to interview them.  There are a bunch of good question lists that you can find on google for these interviews.

Good luck!

[Northwestie]

Even if you don't currently have a financial advisor, but want a "checkup" on your assumptions, the "fee-only" service is the way to go. 

[Bobberth]

Changing advisors really isn't a pain. There is some paperwork to sign to open new and move the old accounts. But it's generally not much hassle. Lots of places charge a fee for clients that are leaving: $50-$100 is fairly normal, so that will be coming out of your account if you change brokerages. If your old advisor used a big BD like Schwab and your new one does too, it's a single page to sign to change advisors and no fees.

The biggest pain will generally come if you have taxable accounts that you move as your new advisor will want to use their preferred funds and allocations so that will entail selling the old holdings at possible capital gains and the taxes that will ensue. I would make sure you talk about your capital gain & tax situation with the new advisor so they fully know your situation and can plan & act accordingly. Many investment people don't think about taxes (who cares about taxes on gains?) and many tax people don't think about investments (staying in sub-par investments to avoid paying taxes) so it's best to discuss this thoroughly to make sure everybody is on the same page of understanding. If you don't have taxable accounts, there is nothing to worry about.

Most advisors will tell you that they would be better than your current one, especially if you come to them because you are unhappy with your current one, but I don't think they should really badmouth the last advisor. Talk to them about your concerns and see if they can answer your questions and if you like what they have to say. But if they spend a lot of time just putting the other advisor down, I would personally be concerned that they didn't have enough good stuff to say about themselves that they have to bash others. But if the other advisor actually did some sub-optimal or dumb stuff, it's ok if they talk about it just if they harp on it would I get concerned.

I highly recommend a fee-only advisor that is also a fiduciary. Make sure they LEGALLY have to have your best interest in mind, not just lip service.

[Capsu78]

"I highly recommend a fee-only advisor that is also a fiduciary."

Yes, usually they will broadcast this on their web presentation- he had me sign a number of pages of legal speak to make sure I understood that he was a fiduciary and also that I understood he would never participate in a sales transaction between us under that agreement.

What I liked is mine is also a SS subject matter expert, which my FA was not and had reviewed a good number of pension scenarios after having served on his former companies pension advisory committee. 

My previous FA would just provide me with pictures of his beautiful family, on their beautiful wooden boat on the lake at their beautiful home...  and call me after the crash to give me a good Monday morning assessment of WTF just happened and a pep talk about staying the course.

[Dicey]

I used a fee-only advisor for a few years, on the advice of someone I really respected. Didn't like him, the stuff he put me in, or the fees. I switched to a Certified  Financial Advisor whose methods I understand and agree with. It is medium expensive and worth every penny. I am so far ahead of where I would have been on my own. I was a good saver, but a chickenshit investor. With the right help, I am now FIRE and have more money than I ever thought possible. Not the standard MMM approach, but it worked crazy well for me.

I used a fee-only advisor for a few years, on the advice of someone I really respected. Didn't like him, the stuff he put me in, or the fees. I switched to a Certified Financial Advisor whose methods I understand and agree with. It is medium expensive and worth every penny. I am so far ahead of where I would have been on my own. I was a good saver, but a chickenshit investor. With the right help, I am now FIRE and have more money than I ever thought possible. Not the standard MMM approach, but it worked crazy well for me.

ETA: "Certified". Thanks to mary w for the reminder that all planners are not created equal.

[Luke Warm]

thanks for the replies. we've asked several people that are money wise and we've gotten several different answers. i would be willing to pay to have someone look over our stuff. what are the fees that an advisor usually charges per hour? thanks.

[Capsu78]

I'm sure price ranges can vary, but in my case I was quite comfortable paying $150/hr.   If you look at a few web presentations from the Fee Only folks, look for a link to "Getting Started" which will guide you as to how the transaction will look.  If you decide to use him/her, they will construct a "statement of work/ project scope".  Mine had a checklist of things to select from-things I wanted (portfolio review, SS and pension claiming strategies) and things I am not interested in spending money on at this time- (insurance review, long term care alternatives, estate planning)
My guy was not a "clock watcher" by any stretch of the imagination and at the end of our 90 minute "1 hour assessment" meeting, he was able to verbally give me a project plan, with a capped cost (...no greater than without further approval).  By the time I got home, he had PDF contracts waiting for me to sign.
The process for me was to gather up everything on his checklist- statements, SS projections, pension papers, spreadsheet listing assets- and deliver them to him with a signed service agreement, and 50% up front/balance due upon completion.
For me, I consider myself organized and financially astute...but I still didn't know what I didn't know.  I believe I have mapped out a financial road for my wife and I through late retirement, but I wanted to put some guardrails on that road.

FWIW, if you are considering a MMM style FIRE scenario, I would very early on tell the advisor that in the initial interview and see if they look at you like you have 2 heads-  as we know from these forums, not everybody can grasp a 20 year career supporting a 40 year retirement guide path.  I had a commission driven FA look at me as if I were nuts for having retired at 57-  "What are your objectives?" he asked "My objective is to never hand out another business card in my life" was my answer.  I told him I was using a fee only advisor and he asked "So this guy is going to give you a plan for about a thousand bucks?!?"  I said "...A little less"  He said "I can't make any money like that!"...to which I nodded and said "Correct".

[Rocketman]

I went with Personal Capital and am happy. I can live with the fees, it is worth it to me. I really like that I am invested in individual stocks ( lots of them) that way I get the Losses on my taxes to offset any gains I get from dividends

[Cwadda]

My financial advisor just loved putting me in mutual funds with 5% front load fees (skimming 5% off everything I put in) as well as annual fees 12 times higher than Vanguard's fees. These were mutual funds that underperform Vanguard index funds.

Needless to say I will never have a financial advisor for the rest of my life. Now I manage everything on my own and I understand my financial goals better than any advisor could.

I'd look for a fiduciary if you're going to go with an advisor. Best of luck.

[getupkid]

At this point, I'd go with a fiduciary as well. I signed up for a Roth IRA through a financial advisor simply because I knew it was time for me to start saving for retirement (I was 25). It took me two years before I started to get a good grasp of my finances and realizes that the mutual fund I was in had a 5.5% front load fee as well as above average annual fee. I'm switching over to Vanguard this month.

[zephyr911]

Yeah, your new advisor: YOU. Nobody will ever look out for your interests this well.

[Catbert]

As others have noted, the mechanics of changing is easy.   One thing you need to do before finding another adviser is to decide what you really want done by them.  Manage your overall portfolio at 1-2% fee a year?  General asset allocation advice?  Sell you a product (stocks or insurance)?  Tax planning?  Or a one-time or periodic basis look at a broad range of your finances to provide advice?  Different advisers for different needs.  (Not that I'm suggesting that you should have someone manage your portfolio for you.)

You may know that any one can call themselves a "financial planner" or "financial adviser".  I know CFP (Certified Financial Planner) is required to take classes, have a certain number of years experience, and, I think, pass some tests.  I think there is different designation for CPAs.   

[MDM]

thanks for the replies. we've asked several people that are money wise and we've gotten several different answers. i would be willing to pay to have someone look over our stuff. what are the fees that an advisor usually charges per hour? thanks.

If you can find a well-regarded person, a one-time arrangement can be worthwhile.

Before you have such a meeting, you might want to check http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/ and https://www.bogleheads.org/forum/viewtopic.php?f=1&t=6211.  You can get some advice for free using those routes - up to you then to decide whether said advice was "priceless" or "not worth what you paid for it." I suspect it will be closer to the former but one never knows. :)

The better you understand your situation and the lingo, the more you will get out of any meeting with a financial advisor.