2921: How to Leave Your Financial Advisor in 5 Simple Steps by Andy Hill of Marriage, Kids and Money

[00:00:00] This is Optimal Finance Daily. How to Leave Your Financial Advisor in 5 Simple Steps by Andy Hill of Marriage, Kids and Money.com. And I'm your host and personal finance enthusiast, Diana Merriam. We're going to jump right into our next post as we optimize your life. How to Leave Your Financial Advisor in 5 Simple Steps by Andy Hill of Marriage, Kids and Money.com.

[00:00:31] If you're feeling like your financial advisor doesn't have your best interest at heart lately, it's time to move on. When they're more focused on selling you products than ensuring your portfolio is earning at its optimum level, it's safe to say that you have a salesman and not an advisor.

[00:00:48] I went through a similar situation in 2011. My wife and I had recently gotten married and we were ready to focus more intently on investing for our retirement. We met with a broker who spent a lot of time with us up front. He discussed our situation and how he could help us save for retirement and plan for our daughter's college needs. As our relationship continued, the meetings became less frequent. When we did ask for advice, he would steer us towards products his company's company's company's company.

[00:01:18] We had strategic relationships with, as opposed to mutual funds that would give us the best return.

[00:01:25] How we lost $5,000 fast.

[00:01:28] In one specific instance, we had saved up around $100,000 to put a big down payment on our next home. We asked for his advice on a safe place to put our money while we were waiting to buy our home in the next couple of years. Our advisor suggested placing the money in a bond fund as it would be much less volatile than the stock market.

[00:01:50] A few months later, our $100,000 was down to $95,000. Yes, I should have educated myself about front load fees before investing such a large chunk of our savings. But that was what we were paying this guy for.

[00:02:08] After that tough money loss, and after educating ourselves further, we decided it was time to leave our financial advisor. We didn't feel like we had a partner in our retirement success anymore. He was not performing his fiduciary duty.

[00:02:24] We transferred all of our money and invested in low-cost index funds with Fidelity at a fraction of the fees we were paying our advisor's firm.

[00:02:34] How to leave your financial advisor in five simple steps.

[00:02:38] Let's say you're in a similar situation as we were, and you're ready to make a change. Check out these five simple steps to leave your financial advisor.

[00:02:48] Number one, find your next investing partner. Before you say goodbye to your current advisor or move any assets, research how and where you'll be investing your money when you leave. You may fall into one of these three categories.

[00:03:04] Number one, I'm clueless. If you have no clue what to do about investing, I'd recommend speaking with an advice-only financial advisor.

[00:03:13] You will pay these folks a flat hourly fee for their advice. They can help you set up a portfolio that works for your situation without taking a percentage of your assets year over year.

[00:03:26] I recommend Nectarine as they're a good resource for finding an advice-only financial advisor that best fits your situation.

[00:03:34] Number two, I'd like an easy do-it-yourself option.

[00:03:39] If you have increased your investing savvy lately, but don't know exactly what to invest in, I'd highly recommend investing your retirement in a target date fund with Vanguard.

[00:03:50] The fees are low, you're investing in market indices that get you a solid return over the long haul, and rebalancing is taken care of for you.

[00:04:00] It's an excellent set-it-and-forget-it option for investors.

[00:04:03] Or number three, I feel confident enough to DIY invest.

[00:04:09] If you want more control and have grown your investing brainpower lately, go with a low-cost partner like Vanguard, Fidelity, or Schwab and create your own portfolio.

[00:04:20] Wherever you choose to go, I'd recommend avoiding commission-based financial advisors.

[00:04:27] Based on their business model, they can be more interested in selling you specific products than advising you towards a successful retirement.

[00:04:35] Number two, understand the fees.

[00:04:39] Once you've chosen your new partner, speak with them about the fees associated with the transfer of assets.

[00:04:45] Here are some good questions to ask.

[00:04:48] If I transfer my assets over to you, will there be any fees when I open my account?

[00:04:53] Should I plan to liquidate my assets before transferring to avoid fees?

[00:04:58] Some firms may charge a fee to liquidate funds.

[00:05:02] And what other fees should I be aware of?

[00:05:06] Also, research the fees associated with closing out your current investment account.

[00:05:11] For example, when we closed an account with Fidelity to move over to Vanguard, we were charged $50.

[00:05:18] Number three, have your new firm help with the transfer.

[00:05:23] Given that your new investment partner is getting your business, they're very keen on making your transition process as smooth as possible.

[00:05:31] Take advantage of their uber kindness and ask them what is the easiest process to transfer your assets over.

[00:05:39] Usually, they'll have an online transfer system through their website,

[00:05:43] or they'll require you to fill out paperwork and mail it in to complete the transfer.

[00:05:48] Depending on who you choose, the full transfer process can take anywhere from 5 to 10 business days.

[00:05:55] Number four, do not send yourself the money for a 401k or IRA.

[00:06:01] If you have a 401k, traditional IRA, Roth IRA, or any other tax-advantaged account,

[00:06:08] do not send yourself the money as you're making the transfer over to your new investing partner.

[00:06:14] You could be slapped with a 10% early withdrawal penalty and have to pay a boatload of taxes on your assets,

[00:06:21] depending on your type of account.

[00:06:23] Instead, transfer the assets directly from one firm to the other.

[00:06:28] And number five, remove emotion from the equation.

[00:06:33] If you're dreading the phone call to your current broker, I completely understand.

[00:06:37] Who knows? Your investment advisor may be your brother-in-law.

[00:06:41] Yikes. I pray for you.

[00:06:44] Try your best to remove emotion from the equation.

[00:06:47] You may hurt some feelings, but this is your retirement we're talking about here.

[00:06:52] Do as much of the legwork in transferring the assets over with your new investing partner.

[00:06:57] Once the money has been transferred out, if you feel compelled,

[00:07:00] you can call your old partner and let them know the account can be closed.

[00:07:04] If you call them beforehand, they'll try to get you to stay

[00:07:08] and tell you all sorts of reasons you're making a mistake.

[00:07:11] Avoid that call if you can.

[00:07:14] If it really is a family member or a close friend who's currently managing your money,

[00:07:18] then I'd discuss the reasons you're leaving in person.

[00:07:21] Show them the money you'd be saving and why you're not pleased with the overall partnership.

[00:07:27] If it were me, I'd want to know so I can improve and adjust my approach towards advising.

[00:07:32] Who knows? Your frank advice may drastically improve their business.

[00:07:42] You just listened to the post titled,

[00:07:44] How to Leave Your Financial Advisor in 5 Simple Steps by Andy Hill of MarriageKidsAndMoney.com

[00:07:50] and I'll be right back with my commentary.

[00:07:53] When I chat with folks about working with financial advisors,

[00:07:57] I often find out they're not actually working with a financial planner.

[00:08:01] The terms can get really confusing, especially with designations like CFP and RIA floating around.

[00:08:10] If you're on the hunt for a real planner,

[00:08:13] make sure you're not just picking someone who's going to choose your investments for you.

[00:08:18] A lot of people who call themselves financial advisors are really just investment pickers.

[00:08:23] For most of us, investing is actually the easiest part of managing our money.

[00:08:28] If you want a solid financial plan without any conflicts of interest,

[00:08:33] look for a flat fee advisor, also known as an advice-only advisor as described in this article.

[00:08:40] This is different from fee-only or fee-based advisors.

[00:08:44] With a flat fee, you're paying them for their time,

[00:08:47] not a percentage of your portfolio through AUM fees or assets under management fees.

[00:08:53] The catch is that the flat fee advisors are super hard to find.

[00:08:58] Out of about 700,000 people who claim to be financial advisors,

[00:09:02] only about 3% work on a flat fee basis.

[00:09:06] This makes it even tougher to access unbiased advice.

[00:09:10] So it's crucial for us to boost our own financial literacy.

[00:09:14] But I agree with Andy that Nectarine is a great resource for finding an advice-only financial advisor.

[00:09:22] If you're curious how the financial advising world works

[00:09:25] and how an advisor can fit into your financial journey,

[00:09:29] check out the video,

[00:09:30] Are Fire and Financial Advisors Incompatible?

[00:09:33] on the Economy Conference YouTube channel.

[00:09:37] And that will do it for today.

[00:09:39] Have a great day and weekend.

[00:09:40] And I'll be back here tomorrow where your optimal life awaits.

[00:09:44] Thank you.

[00:09:44] Thank you.