Firing an Advisor

Recognize that you are making a commitment to a relationship when you select an Advisor. Yes, you have the right and may well need to exercise it to fire a manager or advisor. But you should exercise this power wisely. The more effort you put into selecting an advisor, the less likely you are to need to switch down the road. This is because you are more likely to find someone you have a rapport with and with whom trust can be built. While you do want the advisor to perform and protect or build your nest egg (depending on your agreed-upon strategy), you must recognize the extent of the manager or advisor’s realistic capabilities. Statistically, very few managers consistently beat markets, and most will lag markets over at least some period of their career. As long as a manager has been sticking to the mutually agreed strategy, a bad year may not be cause for termination. There are reasons why performance may slip over a particular period. Some of these reasons may be truly outside the Advisor’s control.

You should get in the habit of periodically evaluating the advisor’s performance. Make it clear early on that you are intend to do this and do it when the time comes (annually would be a reasonable timeframe for reviews). Keep in mind that firing an advisor prematurely can mean interrupting a plan in mid-stride.

Having said all that, if you find that you are for whatever reason uncomfortable with the advisor’s performance, credibility, integrity, or any other relevant measure, you must move on. No apologies are necessary on your part.

It may be wise before notifying the advisor formally of your decision to first identify a new advisor and find out how and when it will be most sensible to transfer your account(s) and/or assets. Predictably, the now ex-advisor will do whatever is in his or her power to keep you as a client. Be firm and insist on moving on. It doesn’t serve any purpose at this point to get involved in a lengthy discussion or sales pitch.

Do your research upfront so you don’t suddenly find yourself doubting your decision in the middle of the process. This only creates anxiety for everyone—you and the two advisors.

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