Your Financial Advisor Relationship: What If You No Longer Love The One You’re With?

Is Valentine’s Day an occasion that you and your significant other look forward to celebrating each year? Or, like many people, do you approach it with some trepidation? While Valentine’s Day can boost feelings of satisfaction in a relationship by giving couples a chance to express their love, it can also reveal cracks in relationships that might be on a less than solid footing.

While I’m not about to offer advice in regard to anyone’s love life, I do know a thing or two about what makes relationships not only work—but thrive. And I have no doubt that my bride of 36 years, Jeanie, would totally agree. Nonetheless, with Valentine’s Day around the corner, I’m going to err on the side of caution and stick to talking about the client-advisor relationship. Specifically: What makes it work and how do you know when it’s time to call it quits?

Trust is fundamental

Successful long-term relationships are built on a foundation of trust and intimacy, and the client-advisor relationship is no different. Our profession depends on people sharing some of the most intimate details of their lives, from their finances, to their personal values, and the hopes and dreams they hold for themselves and their families. Clients need to feel they can safely share their beliefs, expectations, worries and misgivings in an open and honest manner, without fear of judgement. The advisor’s role is to create a safe space deserving of their clients’ trust through a commitment to transparency, confidentiality and an approach that always places client interests first.

How do you know if your relationship lacks trust? Like any relationship, things may seem okay on the surface—as long as you don’t dig too deep. However, if you’ve ever hesitated to share information with your advisor, deliberately held information back due to concerns about what your advisor might think, or failed to tell your advisor that you didn’t intend to follow their advice, these may be signs that the relationship is in trouble. Keep in mind, you’re never obligated to follow your advisor’s advice. What you choose to do with your money is ultimately up to you. While your advisor is there to provide guidance, if a recommendation makes you uncomfortable, or doesn’t make sense, it may not be right for you. On the flip side, if you don’t trust your advisor enough to share important details or concerns, your advisor can’t provide the best advice for your situation. They also can’t provide an alternative strategy or path if they don’t know that you don’t plan to follow through on their recommendations, which brings us to our next point: communication.

Communication is key

Lack of communication is a common reason why couples split up. Poor communication can lead to blame, anxiety, misunderstanding, resentment and mistakes. Avoiding miscommunication begins with clear, respectful and honest dialog, which is critical in any relationship, but especially when it comes to conversations about your money and the purpose behind it. You should expect your advisor to ask a lot of questions, especially in the early stages of the relationship, and educate you on financial topics and their latest thinking on the markets. If your advisor doesn’t appear interested in learning about what drives you and what you want for your family and your future, something is amiss.

You should also expect your advisor to reach out to touch base with you regularly and communicate information about the markets and financial topics that may interest you through various channels, such as email, social media, digital newsletters or blogs. You should also expect a timely response to your requests and inquiries.

Remember, communication is a two-way street. If you’re not willing to provide information or communicate about changes taking place in your life, your advisor will have a hard time proactively serving your needs and helping you accomplish your goals while avoiding common pitfalls.

Standards matter

When asked if their advisor is held to a fiduciary standard, many people are unsure how to answer. First, it’s important to understand that not every financial professional is required to provide a fiduciary standard of care. For example, financial professionals who are registered agents of a broker/dealer or an insurance company may not refer to themselves as a financial advisor and are not required to hold themselves to a fiduciary standard.

On the other hand, a fiduciary is required to make recommendations that are in their clients’ best interest, rather than the best interests of the advisor, the advisor’s employer, or any other entity. While that may sound simple, ensuring that client interests always come first requires advisors to institute strict processes, procedures and structures. Fiduciary advisors charge asset management fees, direct financial planning fees, hourly fees or retainer fees to a client are structurally investment advisor representatives (IARs) and work for a registered investment advisor (RIA) firm. RIAs are required to register either with the SEC or the states they do business in. State or federal RIA registration requires the firm to serve firm clients at a fiduciary standard. Any of their employees or representatives also must maintain this stand of care.

While the concept of a fiduciary has evolved over time, it generally encapsulates the following duties:

• Duty of loyalty – Place the interests of a client over their own. Avoid or disclose any material conflicts of interest and property manage any conflicts. Act without regard to the interests of the advisor’s employing firm.
• Duty of care – Act with care, prudence and diligence when making recommendations to a client. Consider the client’s goals, risk tolerance and objectives in providing investment advice.
• Duty to follow client instructions – Respect and comply with the obligations, duties, policies and restrictions of any client engagement.

Not sure if your advisor serves in a fiduciary capacity? Ask. Your advisor should be willing to disclose how they are registered, whether they are required to uphold a fiduciary standard and how they are compensated, including any fees or expenses associated with the products or services they provide.

When the shoe no longer fits

In the original tale by The Brothers Grimm, one of Cinderella’s stepsisters cut off her toes while the other cut off part of her heel in their ill-fated attempts to prove to the charming prince that the infamous slipper was a perfect fit. (Talk about getting off on the wrong foot!) The moral of the story? Relationships can’t be forced. They’re either a good fit for both parties or they’re not. However, even the best relationships are subject to change over time as people grow and evolve and their needs and priorities change. When both parties no longer value the same things, or one is resistant to change, it’s possible for one or both parties to outgrow the relationship. Where the clients and their advisors are concerned, this most often happens when the client’s needs exceed the advisor’s current capabilities or service offering.

The resources advisors bring to meeting client needs are critical for retaining long-term relationships. Financial services is a fast-paced and dynamically changing industry. That can be challenging for advisors who fail to keep up with the latest technologies or expand their service offerings to meet an ever-growing range of client needs and expectations. And no matter how much experience or how many credentials an advisor brings to the table, financial management requires a multi-disciplinary perspective and approach—especially as you accumulate more wealth. The greater your wealth, the more complex it is to manage. The need for deliberate, tailored and creative strategies addressing family wealth, tax, estate, charitable giving, business succession and retirement planning grows along with the value of your portfolio. If your current advisor is not able to provide access to specialized services and advice to meet your growing needs—either in-house or through relationships they’ve cultivated with outside specialists—it may be time to look elsewhere.

While there’s no requirement to love your advisor, you should love the way their advice and guidance makes you feel about your future. If that doesn’t include a sense of confidence that you’re on the right path toward accomplishing your goals and living your life with purpose, you may want to spend some time reflecting on why that is and what needs to change.

Regardless of who you choose to work with or how long you’ve worked with them, it’s always appropriate to ask questions, so you know what you’re paying for and whether you’re receiving the best service and advice for your needs. To learn more, download our complimentary guide, 10 Questions to Determine if Your Advisor Meets Standards.