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How to dump your big-bank financial advisor

Yes, breaking up is hard to do.  I know.  I’ve been dumped and have done the dumping myself.  The fallout is never easy.  Oh, I guess the same goes with my big-bank financial advisor as well.  I used to have one, many years ago.  Those days are over and I’m glad I did it.

If you’re considering breaking up with your big-bank financial advisor you’ve come to the right place to get started.

Step # 1 – It’s Not You It’s Me (Or Maybe It Is You)

Advisor

Having an experienced financial advisor is a definitely asset, as long as they are providing value.  If however, they are nowhere to be seen or heard from for years on end I’m not convinced that’s value added.  In my opinion, value for services comes from making a difference, services that stand out from others:

  • What services are they offering you cannot do yourself?
  • What do they specialize in?  Financial advice or just a few biased financial products?
  • What expertise do they provide you cannot acquire yourself?
  • What makes them different (from other advisors), friends or family members with similar expertise?

If you’re struggling to answer these questions about your financial advisor, something might be wrong with the relationship.  Also, consider answering the following questions about you as well:

  • What financial decisions do I make myself?
  • What financial decisions do I struggle with?

I think the key to getting help in life, financial advice included, is to understand you.  The more you understand who you are and what you are/are not capable of, the better you can define your needs.

Step # 2 – I Have Needs Don’t You Know

So, maybe by answering the questions above, you’ve determined you should spend less than you make and having some money invested for your financial future is probably a good thing.  With that in mind, consider writing down a few financial goals by answering questions like:

  • What are my savings goals?  What am I saving for now?
  • What are my investing goals?  How are those investments performing?
  • When would I like to pay off my mortgage?
  • Do I need to save for my kid’s education?
  • What other financial obligations do I have?  What keeps me up at night?

Understanding what you have, where you are and what you might need is a personal exercise only you can account for.  It is also a HUGE part of figuring out where you have to go for help.  Take some time to do a self-assessment.  I encourage you to inventory the assets and liabilities around you.  You might be surprised to find out you know much more about your personal finances than you think.

Step # 3 – I Need My Space (See Ya)

At this point you’ve figured out who you are, where you are and little bit about what you need.  Now, it’s time to put together a plan with much more focus on you.  Here are some financial facts to get your started on your new financial plan:

Fact: Did you know that mutual funds in Canada are some of the most expensive fund products in the world?

Fact: Did you know you can invest in Exchange Traded Funds (ETFs) for fractions of the cost (of Canadian mutual funds)?

Fact: Did you know that Tax Free Savings Accounts can be much more than a cash savings account?

Fact: Did you know that every lump sum mortgage payment you make can reduce your mortgage principal?

This blog, many other blogs and some great financial forums exist to help you learn more about the alternative products and combinations of financial solutions and strategies available to you, if that is, you want to make time to check them out. The best part is, in most cases this information is FREE.  There are no money management fees or debts to be paid, at least on my site.  Kidding aside, you can make the leap from your big-bank financial advisor to do-it-yourselfer (DIYer) or work with another financial advisor if you need to, now that you’re armed with some new focused needs.  It will take courage to break your financial advisor’s heart but it might be the best thing you’ll ever do for yours.

I recognize the thought of leaving your trusted big-bank financial advisor might be challenging and downright scary.  You’ve dealt with them for so long and they know you by middle name and even your dog’s name too.   The thing is folks:  you can find better help because thousands of investors have done it before you, either on their own or with a fee-only advisor.  This is why I’m not suggesting you avoid financial advisors all together – there are many great fee-only specialists that can tailor a financial plan for you by answering many of my questions above and much more.  I bet these fee-only advisors will even book performance review meetings with you regularly and they won’t break dates because their focus is on you not financial products.

What I am recommending today is this:  if you haven’t heard from your advisor for a very long time then take action.  Every relationship – even a financial one – needs attention.

Got a story to share about breaking up with a financial advisor?  I’d like to hear it.

Image courtesy:  Forbes.

Filed in: Investor Behaviour

26 Responses to "How to dump your big-bank financial advisor"

  1. Bet Crooks says:

    Periodically someone from my husband’s bank phones insisting he/she is his new financial advisor. I find if we never call back they eventually go away. (We don’t/have never used the marketing reps from the banks to help us with our finances so I don’t know how good/bad their service is.)

  2. Ben says:

    I agree, there are great financial advisors out there, but there are many more that are value detractors. They should be there to help you make good decisions and not abandon your plan at the first sign of trouble. Also, most investors with smaller amounts of capital won’t get the greatest service from most places. Hourly advisors are a good idea for those that want to get started but aren’t sure about going with a full time advisor.

    I’ve heard plenty of horror stories about sky high commissions and expenses with complex products. That should be your first warning sign.

    • There are a bunch of great financial advisors out there, but I suspect there are many bad apples as well. I think a fiduciary financial planning system is a place where the industry in Canada must go. I hope the demand will be great enough for that someday, and people will vote with their wallets. We’ll see.

  3. Brian So says:

    Just remember this: you pay 1% of your equity and balanced mutual fund account and 0.5% for fixed income mutual fund account each year to your financial advisor. Do a quick calculation and if he/she doesn’t provide the value to justify the cost, then it’s time to move on.

    • Well said Brian. I have no struggle with paying fee-only financial advisors or any financial advisors for that matter, that can deliver value for money. If however, there is no value to be found this is where my problem lies.

  4. @Brian So
    Learning to become a DIY frugal investor is so important. The financial advisor charges fees and the mutual fund has its fees. That’s a lot of money to pay for something you could just invest in directly yourself.

  5. Moneycone says:

    It might seem like a simple thing to do, but in reality saying goodbye to financial advisors that you’ve been with for a long time can be very hard (Financial advisors are counting on it!)! Especially for older folks.

    I hope the tips in this post comes in handy for anyone trying to get rid of their financial advisor.

    • It can be for sure. I feel for some older folks, it can’t be easy since every long-term relationship is difficult to break. A financial relationship is no exception.

      I hope this post helps others or at very least, helps others consider alternatives if nothing more.

  6. I have never had a financial advisor. I have never trusted them; not that I think they are particularly untrustworthy, just that I know they aren’t really working for me, they are working for themselves. I feel like with research, I can do just fine.

    • Daisy, I think there are some great advisors but they are rare since the incentives are perverse. A trusted fee-only advisor is the only type of advisor I would trust. Or me.

  7. I have to admit we do have a great advisor who keeps us in the loop and contacts us once per year to set up a meeting to go over our portfolio. He explains everything to us in his office and his team is very professional. Thanks for this post and the tips. I think with more research and then the nerve to venture out might be in the future but it’s a hard road to cross to be honest. I think starting small on my own might ease the pain. What do you reckon?

    • Great to hear Mr. CBB. Good help is hard to find. I’ll write a post about easing into investments. I’ll make a few suggestions for folks and readers can critique it from there.

  8. Cat says:

    Great post! I am so going to go to ETFs as soon as my #$#@$ DSC no longer apply. Still kicking myself for getting into them!

  9. While it may be difficult to realize, you need to keep in mind that there are many financial management options out there for you. And, just because your adviser works for a big bank doesn’t mean that they will get you the best results. So, if you are not happy, look for an alternative and then dump your adviser.

  10. Cory Papineau says:

    Hi Mark,

    A very good post.

    I would like to expand on it though from my perspective. I am a Certified Financial Planner and have worked for the big banks and now a Credit Union for the past 15 years. I do sell mutual funds as part of my practice – hopefully this disclosure does not mean people skip my post!

    We are mixing two topic here, Financial Planning and Investment Product Advice.

    1) Financial Planning

    These are 2 seperate and distinct topics, unfortunately they are being mixed together (much of the blame for this is the financial service industry as they have tied these 2 topics togther for so long).

    Financial Planning needs to be stripped away from the products. People need advice on Cashflow, debt management, tax planning, retirement planning, will and estate issues, mixed family issues etc. You can find all of these topics and more addressed through many fantastic blogs (yours included Mark) , news journalists and even from the CRA but it is MY job as a financial planner to distill what is important to your situation. I am extremely active on Social Media for this reason. I strongly believe that continuing education (at even a much higher level than now) is what clients deserve from their planner.

    I also help find other professionals that can help my clients. I know what my limitations are and I can refer you to the appropriate accountant, lawyer, real estate agent and lots of other professions (Funeral Director, Electricians and even a Computer Technician!)

    2) Investment Product Advice.

    Most clients aren’t receiving investment advice – They are being sold a product. They come in different packages with different price points but they are essentially all very similar.

    The concept of stock picking brokers is not the reality that most deal with. Buy/Sell recommendations come from legions of Analysts that are filtered through Head Offices or a whole portfolio is recommended made up of individual stocks or ETFs. Mutual Funds are very similar but the fee is higher because there is an additional layer of middlemen.
    I agree that for long term holdings buying a passive porfolio will likely benefit most investors it is just how they access the market and how they pay for it.

    This is where much of the anger towards financial services is directed. It is this “sales” component and the murkiness as to what you are getting for all the money you are spending.

    Mutual Funds are extremely expensive. Simple. However, they do have value. They are a convenience product. Much like going to a restaurant or prepackaged food at a grocery store, getting your oil changed at a Quickie Lube or taking your clothes to a cleaner to be laundered you are paying for the ease and simplicity. There are many different service models out there and you can choose the one that best fits your needs.

    With the changes coming this July where a summary in Dollars as to what you paid in fees per account will bring about a positive change that I believe will change the financial landscape over time. When someone finally sees that they are being charged $2000 a year on their $100000 and haven’t spoken to their so-called “advisor” for 3 or 4 years I think this will push people to have a second look at their portfolios.
    I think we will see a number of advisors leave the business over time as they just can’t show what value they bring to the table.

    3) Get Educated!

    I know I am speaking to the choir here as most that read financial blogs are doing that for precisely this reason but it is this ability for people to find information that is relevant to their situation that improves financial literacy.

    Learn about how your Advisor is paid (including commission or salary & bonuses etc.)

    One last thing. I deal with a number of clients who also have self-directed accounts. These are some of my best clients because they are engaged in their own financial well-being. It doesn’t have to be only a one option solution. Find the structure of advice and products that work for you!

    • Thanks for making the time to write such a detailed comment Cory.

      Totally agree with you: “financial Planning needs to be stripped away from the products.”

      Unfortunately this is not my experience with big-bank advisors and I strongly feel Canadians need more help from folks like you, to distill what is important to them. Secondly, mutual Funds are by and large a convenience product but like most things that come easy, it comes at a cost. There are alternatives for investors and via this blog, I’m simply provoking folks to question that status quo.

      That leaves with me to my third point, which I’m very happy to say you support as well: get educated! The best investor is an engaged and enrolled investor in their future. Like most things in life, those that have a desire to learn and get educated tend to come out on top. Learning about finance is a choice and from a personal perspective, I’m very happy I have the desire to learn more and be better. I can appreciate not everyone is wired the same way.

      Thanks for the blog support Cory and all the social media interaction. I’m very appreciative of followers and fans like yourself.

  11. Anonymous says:

    @My Own Advisor
    Yeah, a great post from a bank advisor. What a crazy mixed up thing! :).

    I agree wholeheartedly. If you’re struggling to manage your money/debt/income etc to even find the money to invest or retire, that’s financial planning. Some place like http://www.moneycoaches.ca I think do a great job of that. I’ve spoken to a number of their advisors and they seem to specialize in helping regular folks get out of debt and back on track, on a fee-only basis. I think some investment sales reps do a bit of a job on this too, but doubt it’s the focus of their job.

    Seperately is the whole ‘push mutual funds’ thing. And that’s a whole lot different than financial planning – it’s selling investments.

    Unfortunately, all the money is in selling investments and there’s no money in the real ‘financial planning’. That’s not anyone’s fault other than the consumers – because consumers simply won’t pay for financial advise explicitly. Oh, lots of talk about how it’s a great idea and everyone would love to use someone like that but talk is cheap – nobody does it.

    • Thanks for the detailed comment.

      I think fee-only advisors are the way to go. I know if I need help, at some point, this is where I’ll go.

      No doubt selling products is big business, but if it does not come with quality, tailored service, that’s just marketing.

  12. Cory Papineau says:

    @Anonymous
    I this is in reference to my post – Thanks I guess! Working for a Credit Union it is not solely about the bottom line so my focus has been able to be on my clients financial well being in more ways than just product sales.

    I loved your comment “there’s no money in the real ‘financial planning’. That’s not anyone’s fault other than the consumers – because consumers simply won’t pay for financial advise explicitly.”

    Consumers have been “given” “free” financial planning for so long by the banks and independent Advisors that the value has been discounted to nearly zero.

    I think Mark’s reply to your comment “I think fee-only advisors are the way to go. I know if I need help, at some point, this is where I’ll go.” just indicates the low value placed on the planning advice. It only becomes important somewhere in the future rather than a cornerstone of building you financial and life success.

    Even single, lower income people need some sort of plan, even this is only a temporary stop on their life journey. How many coming out of University sit down to create a plan about debt management, priority and goal setting? I work directly across from the University of Manitoba and can only count about 5 individuals that have shown interest in doing this with me. (No product sale is likely so it is definitely a free service). Will any of these go and pay someone for this service?

    As I mentioned in my previous post I think once people know in dollar terms how much their financial advice (or lack thereof) is costing them they are more likely to seek out other options.

    I really don’t think Fee-only financial planning will be where the market goes. It is much more likely it will be more fee-based (I’ll charge you 1.5% to advise you & manage your investments) rather than I’ll charge you $150 per hour to write a plan with you and charge you $150 a year to review and you manage or find someone to manage your investments.

    We are a society of convenience but we should never limit the options or choices consumers can make, but we should educate them on the costs and the alternatives!

  13. Paul N says:

    Great topic, make as many people aware as you can about this issue. The avererage Joe investor’s out there need to wake up and save their money. I always like to stop and drop a comment anywhere I see this subject discussed.

    No one here has metioned some of the shadier side of investing companies. I’m not sure if it’s appropriate to write some names here. But if you watch the Transformers movies (Optimus….) and you know the name of the country south of Canada it might give you a clue as to one of them…

    Companies that troll weddings and their unsuspecting friends and relatives at parties and talk them into funds with insane MER’s, Locked in DSC’s, and Front loads and a leverage loan to someone who is already in debt. These are the worst of the bunch and they need severe regulation. They give the industry an extra black eye.

  14. I agree! Financial advisor should help you make great decisions and give professional advices.

  15. Nice post. We really need to balance everything before making tough decisions. List down the pros and cons, and see if they really contribute. Then decide.

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