Many folks use financial advisors to manage their money and set themselves up to meet their near- and long-term goals. And while there are plenty of good reasons to work with a financial advisor, most Americans don't trust theirs.
If you're not happy with your advisor, you really shouldn't hesitate to find a new one who's a much better fit. But if you're on the fence, here are a few warning signs that should prompt you to move on to someone else.
1. Your advisor doesn't return your calls
You'd think this one would be a no-brainer, but you'd be surprised at how many clients allow their advisors to get away with going dark on them. Remember, a financial advisor is responsible for not only managing your money but also providing you with a level of respect and customer service you'd expect from any professional you pay. So if you find that you're constantly having to chase yours down, it's time to find someone else.
2. Your advisor doesn't explain the fees you're being charged
Like the rest of us, financial advisors need to make money. And as a client, you shouldn't begrudge yours that opportunity. On the other hand, if you have no idea how your advisor is making money off you or what fees you're paying, consider that a serious red flag.
Financial advisors generally make money in one of two ways -- by receiving commissions in exchange for selling you certain investments, or by taking a fee that's calculated as a percentage of your assets under management. For example, your advisor might receive a $500 commission for getting you to invest $20,000 in a particular fund under the former arrangement, or he or she might take a 1% annual fee on your $200,000 in assets, or $2,000 per year. For the most part, the latter setup is more ideal, but you don't need to write off your advisor for taking commissions provided you're made aware of them. It's when you're left in the dark that the problems arise.
3. Your advisor ignores your feelings about risk
As a general rule, you should load up on riskier investments, such as stocks, when you're younger, and shift toward safer investments, such as bonds, as retirement nears. But that approach doesn't work for everyone. If you're particularly risk averse and the thought of losing money keeps you up at night, your advisor should take that into account when allocating your assets. If he or she doesn't, then it's a sign that you've chosen the wrong one.
Keep in mind that it's perfectly OK for your advisor to try to alleviate your concerns about taking on risk. For example, if the thought of investing in stocks terrifies you, your advisor might explain that the stock market has historically spent more time up rather than down, and that in the long run, investors tend to do well in it. But there's a difference between having that talk and dismissing your feelings about risk, and if your advisor goes the latter route, it's time to let him or her go.
4. Your advisor judges the choices you've made
Maybe you're in your 50s with little retirement savings, or you've taken on a mortgage that monopolizes much of your income. Most professionals would agree that these aren't the best choices if you're looking to set yourself up well for the future, but the last thing your advisor should do is judge or berate you for making those decisions. Rather, he or she should help you develop a financial plan that works around them and helps you overcome whatever obstacles you've been facing. So if yours doesn't, it's time to find someone new.
5. Your advisor doesn't ask about your goals
Many folks aim to buy homes in their 20s or 30s, fund their kids' college education in their 40s or 50s, and retire in their 60s. But just because those tend to be popular objectives doesn't mean they're yours. It's your advisor's job to figure out what goals are most important to you and help you achieve them, so if he or she never asks about them, or never takes them into account, it's a sign that you need someone else in your corner.
6. Your advisor doesn't seek out your input
In most cases, your financial advisor will know more about money management than you will. (Otherwise, what's the point in paying someone?) But while he or she might be the expert, your portfolio shouldn't be a one-person show. Rather, your advisor should present you with choices and ask you to weigh in on decisions that could affect your wealth. And if yours never gives you that opportunity, it means you may be better off seeking a replacement.
There's no sense in hiring a financial advisor if that person isn't going to best serve your needs. If you're displeased with your advisor, do yourself a favor and find someone better. Ask a friend or family member to recommend someone, or search online for an advisor with stellar reviews. Having the right advisor could spell the difference between meeting your financial goals and falling short, and you shouldn't hesitate to let yours go if he or she just plain isn't working for you.