Fire Your Financial Advisor: 10 Reasons to Take Charge of Your Financial Future

In recent years, the call to fire your financial advisor has grown louder, echoing in the corridors of investment circles, especially those pursuing financial independence. Many have started to realize that the traditional route of hiring a financial advisor might not be the most efficient or economical choice.

Before we get into the reasons to fire your financial advisor, let’s first define what a financial advisor is. Unless you are seasoned in the way of financial jargon, you may not understand the differences between financial mentor, financial coach, and financial advisor. 

To be clear, this article is focusing on financial advisors, not financial mentors or financial coaches. Any can provide benefits if you simply do not want to deal with your own money. But please know that no one will care more about your money than you. So let’s make sure we understand what a financial advisor is before we consider breaking up with them….or hiring them in the first place.

The terms “financial mentor,” “financial coach,” and “financial advisor” are often used interchangeably, but they have distinct roles and purposes. Here’s a breakdown of the differences:

Financial Mentor

Role: A financial mentor is someone who provides guidance based on their personal experiences and successes in managing money. They act as a role model and offer insights, wisdom, and advice to help others navigate their financial journeys.

Purpose: The primary purpose of a financial mentor is to inspire, motivate, and share personal experiences. They may not necessarily have formal financial training but have achieved a level of financial success or understanding that others aspire to.

Key Characteristics:

• Often provides guidance for free or as a gesture of goodwill.
• Focuses on sharing personal experiences and lessons learned.
• May not have formal financial credentials.

Financial Coach

Role: A financial coach helps individuals understand the basics of money management, budgeting, and financial planning. They work with clients to develop good financial habits, set goals, and create actionable plans to achieve those goals.

Purpose: The primary purpose of a financial coach is to educate and empower clients to take control of their financial lives. They provide tools, resources, and support to help clients make informed decisions.

Key Characteristics:

• Typically does not provide specific investment advice or manage assets.
• Focuses on behavior, mindset, and financial habits.
• May work with clients on a short-term basis or until specific goals are achieved.

Financial Advisor

Role: A financial advisor is a professional who provides specific financial advice and services to individuals based on their financial situation. They can offer recommendations on investments, insurance, tax planning, retirement planning, and more.

Purpose: The primary purpose of a financial advisor is to guide clients in making informed financial decisions to achieve their long-term goals. They analyze a client’s financial situation and provide tailored recommendations.

Key Characteristics:

• Often has formal financial credentials, such as Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA).
• May charge fees for their services, which can be based on assets under management, hourly rates, or flat fees.
• Provides specific financial strategies and recommendations based on a client’s individual needs. 

Here are ten compelling reasons why you should consider severing ties with your financial advisor and take the reins of your financial future into your own hands.

1. Exorbitant Fees Eating Into Your Savings

One of the primary reasons to fire your financial advisor is the hefty fees that they charge. These fees can significantly diminish your savings over time, leaving you with a smaller nest egg than you anticipated. By managing your investments through low-cost broad market index funds, you can avoid these fees and potentially see higher returns in the long run.

Financial advisors charge based on a number of variables. If you are going to hire or fire a financial advisor, it’s important to know how much a financial advisor costs. This is why. Those “costs” come out of your pocket. Once it leaves your pocket and enters theirs, it is no longer growing for your future. 

2. Unnecessary Portfolio Reallocations: A Strategy to Line Their Pockets

Constant calls to reallocate your portfolio might seem like sound advice, but it often serves to line the pockets of financial advisors with more commissions. This strategy not only disrupts the growth potential of your investments but also incurs additional costs that can be avoided. Learning to manage your portfolio can save you from these unnecessary expenses and help grow your wealth more efficiently.

3. Limited Customization and Personal Touch: Time to Fire Your Financial Advisor

A one-size-fits-all approach rarely works when it comes to financial planning. Unfortunately, many financial advisors offer limited customization options, failing to provide a personal touch that caters to your unique financial goals and circumstances. Taking charge of your investments allows for a more tailored approach, ensuring that your financial strategy aligns with your personal and financial objectives.

4. Underperformance Compared to Index Funds: The Numbers Don’t Lie

Research consistently shows that a significant number of financial advisors underperform compared to index funds. This underperformance can translate to a substantial amount of missed earnings over time. By opting to manage your investments through passive index fund investing, you can potentially achieve better returns and grow your wealth more effectively.

5. The Rise of Self-Managed Investment Platforms: A Beacon of Empowerment

In the digital age, the rise of self-managed investment platforms has empowered individuals to take control of their financial futures. These platforms offer a plethora of resources and tools that make it easier than ever to manage your investments without the need for a financial advisor. It’s time to embrace this empowerment and fire your financial advisor, paving the way for a brighter financial future.

6. Easy Transition to Self-Managed Accounts: Say Goodbye to Uncomfortable Conversations

Transitioning to a self-managed account is easier than you might think. Brokerage houses like Vanguard and Fidelity offer services that facilitate the transfer of funds to new self-managed accounts, helping you avoid that uncomfortable conversation with your financial advisor. This seamless transition means you can start taking control of your investments without any hassle.

7. Financial Literacy: Your Gateway to Financial Independence

Financial literacy is a powerful tool that can help you build a secure financial future. By learning the basics of financial management, you can effectively manage your investments without relying on a financial advisor. This knowledge not only saves you money but also fosters a sense of financial independence and confidence.

8. Transparency and Control: Reclaim Your Financial Sovereignty

When you fire your financial advisor, you reclaim transparency and control over your financial decisions. This move allows you to avoid potential conflicts of interest and ensures that your investment strategy aligns with your financial goals, giving you peace of mind and a clearer path to achieving your financial objectives.

9. Avoiding Conflicts of Interest: A Step Towards Ethical Investing

The financial advisory industry is rife with potential conflicts of interest. By managing your investments, you can avoid these conflicts and ensure that your financial strategy is aligned with your values and goals. This approach fosters ethical investing and promotes a healthier financial ecosystem.

10. Building a Future-Proof Investment Strategy: The Smart Move

In a rapidly changing financial landscape, building a future-proof investment strategy is more important than ever. When you fire your financial advisor, you gain the flexibility to adapt your investment strategy to changing market conditions, ensuring that your financial future remains secure and prosperous.

Conclusion: Time to Fire Your Financial Advisor

The journey to financial independence begins with a single step: the decision to fire your financial advisor. By taking charge of your financial future, you can avoid exorbitant fees, unnecessary portfolio reallocations, and potential conflicts of interest, paving the way for a brighter and more prosperous financial future.

Call-to-Action: Join the Movement to Fire Your Financial Advisor

Are you ready to take control of your financial destiny? Join the growing movement of individuals who have chosen to fire their financial advisors and embrace the empowerment that comes with managing their investments. Share your story and inspire others to take the leap towards financial independence.

How do you break up with a financial advisor?

• Review Your Agreement: Before making any decisions, review any contracts or agreements you have with your financial advisor. This will give you an understanding of any termination clauses, fees, or notice periods.
• Prepare for the Conversation: It’s essential to be clear about your reasons for leaving. Whether it’s due to high fees, poor performance, or a lack of communication, knowing your reasons will make the conversation more straightforward. In many cases you do not need to have a conversation to fire your financial advisor.
• Schedule a Meeting: It’s respectful to inform your financial advisor in person or over the phone rather than via email. Schedule a meeting or call to discuss your decision. You can go this route but technology and your new fund family or brokerage house may do the heavy lifting for you here, all electronically.
• Stay Calm and Professional: If you do speak to your advisor, keep the conversation professional. Express your gratitude for their services but be firm in your decision.
• Handle the Logistics: Ask about the process for transferring your assets or accounts. Ensure you have all necessary documentation and understand any associated fees.
• Select a New Advisor or Strategy: If you’re switching to a new advisor, start the onboarding process with them. If you’re managing your finances independently, ensure you have a plan in place.

When should I dump my financial advisor?

• Poor Performance: If your portfolio consistently underperforms relevant benchmarks and your advisor doesn’t provide a clear strategy for improvement.
• High Fees: If you’re paying exorbitant fees that aren’t justified by the service or performance you’re receiving.
• Lack of Communication: If your advisor doesn’t communicate regularly, fails to explain financial strategies, or doesn’t listen to your concerns.
• Misaligned Goals: If your advisor doesn’t understand or respect your financial goals and risk tolerance.
• Ethical Concerns: If you suspect any unethical behavior or conflicts of interest.

Why do people leave their financial advisor?

• Dissatisfaction with Performance: Clients expect a return on their investments, and consistent underperformance can lead to dissatisfaction.
• Communication Issues: A lack of regular check-ins, not being responsive to queries, or failing to explain financial strategies can strain the advisor-client relationship.
• High or Hidden Fees: Clients may leave if they feel they’re paying too much for the services they’re receiving or if they discover undisclosed fees.
• Change in Financial Situation or Goals: As clients’ lives evolve, their financial needs and goals might change, leading them to seek a different type of financial advice.
• Seeking More Control: Some clients may decide to manage their finances independently or explore robo-advisors.

What is the number 1 reason that clients leave their advisors?

While the specific reason can vary based on individual experiences and surveys, one of the most commonly cited reasons clients leave their advisors is a lack of proactive communication. Clients value advisors who regularly check in, provide updates, and are responsive to their needs. When clients feel neglected or out of the loop, they may seek an advisor who offers better communication and more personalized service.

One Big Caveat to Consider

You know your current financial situation and have at least an idea of what your goals are. 

You know your habits and how they have or haven’t helped support those financial goals.

The point of this article is not to dissuade you from getting advice from smart, well-intentioned sources, it is merely to be aware of the costs of those choices. You should know exactly what you are getting for your money and understand your other options. Those options may include financial mentors and financial coaches. Each brings a set of expectations. You may find that these provide what you need without the conflicts of interest and exorbitant fees. 

I think we can agree on the following:

The person who saves something, regardless of fees spent, is better off than the person who saves nothing.

But damn is it frustrating to look back, see the amount of unnecessary fees you paid, and then realize that nearly all of that money could have been compounding over time, adding a significant amount to your bottom line.