Twelve warning signs that you might have outgrown your financial adviser

by Tony Novak, CPA, MBA, MT
revised 2/2/2014

Most of us are first exposed to the services of a financial adviser while opening an investment account, buying insurance or getting help with taxes. Many "front line" retail level financial advisers are actually the sales agents of banks, insurance companies and investment firms. In the past, financial companies believed that they could boost sales by training their sales agents in financial planning. It is still common for many people to have designations on their business card that also includes the name of the products they sell. But over time, many people realize that they need better financial advice and eventually turn to an independent professional financial adviser. The more successful you become, the more likely that you have outgrown the capabilities of your original financial adviser.

These twelve warning signs, listed in no particular order, should signal that it is time to consider finding a new financial adviser.

1. Your banking, accounting, taxes and investment accounts are not integrated.

It is simply not possible to maximize your overall financial opportunities while dealing with each part of your finances as a separate unit. Virtually all high net worth individuals and their advisers utilize technology to help integrate and simplify finances by pulling together many transactions into a manageable format. Today' s technology allows professional advisers to pull together all of the various service providers and tie all of the reporting an management functions together. This saves time and enables smarter decisions. This type of automated integration save thousands of dollars in accounting and tax preparation fees over the long term. If you and your adviser are not up to speed with integrated technology, you owe it to yourself to see what is possible.

2. Your adviser avoids discussing topics that are important to you.

It is easy to find a good investment manager or life insurance agent; they seem to be everywhere. But the reality is that the differences in the rate of return on your investments or the choice of which insurance you choose to buy has little effect on your overall financial success. Unfortunately, most advisers focus on one or two areas of practice and ignore the factors that make the most difference. Most clients request occasional help with the a wide range of financial issues that includes finding the best opportunities and realizing savings available with your taxes, accounting, education funding, health plans and employee benefits and mortgages. Your financial life is multi-faceted. It is important to have an adviser who is comfortable helping with all of the important and increasingly complicated financial issues. Do not settle for an adviser who provides primarily one service.

3. You do not feel comfortable making a casual call to your adviser without a specific purpose.

It makes sense to check in your adviser from time to time just to see how things are going. It is important to feel that your call is welcome. You may feel that the adviser is only interested in earning commissions or that it is bothersome when you call just to chat. In this case, you are probably not benefiting from all of the opportunities that would unfold in a comfortable

4. You do not have your adviser's cell phone number.

Advisers almost always give their best clients a cell phone number. If you don' t have it, then you are probably not one of the adviser' s best clients. You could find a better match.

5. Your marriage is in trouble; you are separated or getting divorced.

One of the leading contributors to divorce is financial stress. While this may not be the direct fault of the financial adviser, it does indicate that financial communication and goal attainment was less than it should have been. In most cases a troubled marriage goes hand-in-hand with a poor financial adviser relationship. Find an adviser who can help work through this difficult time. Once a decision to divorce has been made, each spouse should have a separate adviser.

6. You do not have a written investment policy statement. 

Good advisers utilize the power of a written investment policy statement in increasing rate of portfolio return and wealth over the long term. An adviser who ignored the stated policy may be liable for past losses, but do not let this happen again.

7. Your investments do not reflect your personal values or are not performing in accordance with your written policy.

The saying "put your money where your mouth is" carries the most clout when applied to investment decisions. Most people feel more integrity when their investments are consistent with their political, social or religious values.

Investment performance should be evaluated against a pre-determined  policy statement. If the statement has been reviewed and is solid but the investments are not performing in tune, then this indicates that the adviser is missing something or not giving your account the attention you need.

8. You do not know how much your adviser is paid to provide service to you.

Transparency of compensation is the cornerstone of a professional adviser relationship. Every adviser has inherent bias and potential conflicts of interest that stem from the compensation arrangement. It is important to understand those that impact your adviser.

9. You paid less than $1,000 or more than $10,000 to your adviser.

If you are an upper-middle income client who paid less than $1,000 in total fees for advice over the past year then chances are that additional planning would improve your overall situation. If you paid more than $10,000 in total fees it is more likely that there are opportunities for savings without loss of results. Of course, the most appropriate and beneficial level of fees will change for special life circumstances like a divorce or for those with lower or higher incomes. There are no hard rules here, but it seems likely that for the vast majority of upper middle income clients, the best value will be obtained by spending more than $1,000 for help but barring extraordinary circumstances less than $10,000.

10. You cannot summarize the cost and benefits of last year' s financial planning efforts.

It is important to be able to state succinctly, for example "I paid my adviser $1,600 and achieved a tax savings of $10,000, insurance reduction of $$1,200 and improved investment results". If you cannot easily identify the profits of achieved by your financial adviser, you must question whether it makes sense at all.

11. You cannot summarize your plan for financial independence in a few short sentences.

You are far more likely to achieve financial success if you understand the roadmap to get there. What' s more, both you and your adviser need to be looking at the same map. A plan of "buying a lot of lottery tickets" does not count.

12. You do not know your credit rating or do not understand how it affects your overall financial success.

Perhaps the single most important indicator or predictor of your financial success over the next few years is your consumer credit score. Of course, the price you pay for mortgages, auto loans and business credit is directly controlled by your credit score. But many people do not realize that credit score affects things like hiring, job promotions, memberships in business and social organizations, eligibility for special consumer offers, as well as the cost of auto and homeowners insurance. It is important that you and your financial adviser know where your credit score stands now and incorporate a plan to manage and improve your score to add to your financial bottom line. Unfortunately too many advisers ignore this factor and just try to work around the credit issue rather than work with clients to manage this important factor in the financial planning process.

It is never too late to put an end to mistakes of the past and start on a new path to improved financial success.

Invitation from the author: If you think now is the time to consider changing financial advisers, I welcome a no-obligation discussion. I have worked for clients in all 50 states throughout the U.S. for simple one-time solutions to ongoing advisory relationships.

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