It’s hard to believe that it’s been almost 30 years since Jerry broke up with Gillian on Seinfeld because of her “man hands.” This continued a central theme of the show: Jerry simply could not find anyone without deal-breaking faults.
There was a time in my career when I’d get excited about a “Jerry” coming into the office. Sure, they have had three financial advisers in just as many years, but this time would be different… Fast-forward to today, I’m hopeful to weed out those folks who probably should have never hired an adviser in the first place.
All of that said, there are more than a few bad advisers and more than three legitimate reasons to say bye-bye. Almost all of my clients came from other advisers, and all of them had legitimate reasons to move on. Here are three valid reasons that I see often:
1. Lack of trust.
I’m going to break this into categories: break of trust and an ongoing lack of trust.
- Break of trust. In 2018, I had an awkward situation: A prospective client told me that his adviser had lied to him about a tax-related topic. In a world that is so heavily regulated and where the facts are available online for anyone willing to scour the IRS website, I questioned whether this was a “lie” or the adviser was just wrong. Regardless, the trust had been broken. Even if the client had decided to stay with the adviser, the constant second-guessing wouldn’t be healthy for either party.
- Ongoing lack of trust. If, after every review meeting, you find yourself Googling the advice you have received, you either need a new adviser, or you should be doing this on your own. I believe that most advisers provide value in multiples of their cost. That said, there is an entire cohort of the population that should never hire an adviser, because they either, a) enjoy this stuff so much, or b) are unwilling to hand over the reins, which leads to more time and effort for both the client and the adviser.
2. A mismatch between the adviser’s focus and your situation.
Also known as: It’s not you, it’s me. ;-) At my firm, Exit 59, we specialize in working with people who are living off of their investments and need tax, investment and planning help. If the kids of those clients want to work with us, that door is open, too. In 2016, I got a voicemail from an adult daughter of a retired client saying that she was moving to a new adviser because my focus didn’t match her needs. At first, I was offended. After about three minutes, I realized just how reasonable this decision was. She needed help with student loan strategies, disability coverage to protect her growing family and a few other things that we just don’t focus on. She was right to move on.
The adviser who focuses on student loans is not the same adviser who knows the ins and outs of retirement income planning. Just as the adviser who specializes in equity compensation strategy is not the same as the one who helps professional athletes maximize their short, but significant, earnings period. I’ll add to this: You never want to be an adviser’s smallest or largest client. You’ll often end up with poor service on the low end or great service, without expertise, on the high end.
3. The ‘service gap’ is too significant.
I define “service gap” as the difference between what you were promised as a prospective client and what you receive as an actual client. Unfortunately, this is present in many service-based businesses, often as a function of the business’s capacity. Here are the two biggest service gaps I see pop up again and again:
- Communication. I once had a client coming on board because her current adviser had promised her quarterly meetings and had not called for an entire year. So much of this is about setting proper expectations. In this case, we were clear that we follow the dental schedule: twice per year. Brush, floss and you avoid the cavities. Any time you have pain, questions or need help, just call us. She was totally fine with meeting two times per year. Her issue was with such overpromise and underdelivery.
- Performance. This is specifically referencing market performance. If you find yourself in this situation, you may save yourself some heartache in the future by running the other direction from anyone who overpromises here. Your adviser should be able to do better than you over long periods of time, but that doesn’t mean they should “beat the market” or should have bought Nvidia (NVDA) before it went up 250%. They should have a discipline (which should eliminate the behavioral disadvantages we all have as humans), they should reduce unnecessary investment expense, and they should have an asset allocation that makes sense in the current environment and, more important, that is suitable for your goals. It’s completely appropriate and within your rights as a client or prospective client to ask the adviser to articulate these things. If they cannot, or you have witnessed consistent underperformance, it may be time for a second opinion.
If you raised your hand to any of the above and have decided it’s time to move on, let’s talk about how you do it. Here’s the good news: In most situations, you don’t even need to tell your adviser that you’re moving on. The custodians, those who actually hold the money, communicate with each other and can transfer your money to its new home with your authorization. This is sort of like having your friend break up with your boyfriend for you in middle school. It’s a fine option if you never want to see or speak to the person again.
More often, we encourage clients to send a thank-you email. It may go something along the lines of this:
Hi, (fill in the blank),
I wanted to give you a heads-up that you will be receiving notification that my accounts are transferring. As I approach [insert life stage], I have decided to consolidate my investments and planning with a firm that does [insert thing you are getting from new adviser but not from current adviser]. Thank you for everything you have done to get me to where I am today.
Losing clients stings. Anyone who has been in this business for any period of time has had this experience. That said, professionals will not fault you for moving on. They will try to get better or to find clients who are a better fit.
At the end of the day, you should never have a subpar relationship because you are scared of the breakup … assuming it’s for a legitimate reason.
After graduating from the University of Delaware and Georgetown University, I pursued a career in financial planning. At age 26, I earned my CERTIFIED FINANCIAL PLANNER™ certification. I also hold the IRS Enrolled Agent license, which allows for a unique approach to planning that can be beneficial to retirees and those selling their businesses, who are eager to minimize lifetime taxes and maximize income.
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