It’s not unusual for the size of the client’s investment to increase well beyond their advisor’s level of experience and knowledge. Higher net-worth individuals often demand more creative, sophisticated planning for their needs than their original advisor is able to provide.
“Many affluent clients have graduated from their advisor’s capabilities, but are still working with someone who cannot handle their larger financial needs,” says Eric Kearney (www.erickearneyadvisor.com), an investment advisor for Retirement Wealth. “This can be costly, both in terms of investment potential and time wasted, so the client has to pay attention and know when it’s time to change advisors.”
Kearney lists three signs that your money has outgrown your advisor:
- Outdated portfolio. Kearney says a typical scenario sees someone continually growing their net worth, then later realizing that their portfolio never really changes. “The advisor is using the same approach over and over again,” Kearney says. “So by the time the client explores a second opinion, they can see they should have graduated from this very simple portfolio hundreds of thousands of dollars ago. That’s usually when they realize they’re in a fee-ridden portfolio. Therefore, it’s important that you know how your advisor is getting paid and whether that structure gives them the incentive to do a good job.”
- Unaware of all the options. Many investors aren’t aware of their full range of options, Kearney says, adding that their advisors often aren’t either. “If you’re never offered any new ideas or strategies, such as lowering your taxes, reducing your mortgage payment or a long-term care alternative, that means your current advisor is probably stale, and they’re not interested in offering you proactive type service,” Kearney says. “There’s no one-size-fits-all investment advisor when they can come from different fields – CPA’s, insurance agents, financial planners and attorneys. Each has different areas of focus. You should ask your advisor, ‘What are your capabilities outside of traditional asset allocation?’ ”
- Lack of systems, communication. Wealthier clients with multiple financial pieces in motion notice when advisor contact is inconsistent. “There are a lot of people, even with multi-million dollar accounts, who think, ‘Maybe my account is just not big enough for my advisor to pay attention to me,’ ” Kearney says. “That’s usually not true. It’s just a matter of the advisor not having the right systems in place. It’s important to for an advisor to have a team with a point-of-contact person whom the investor can reach any time.”
“There comes a point when you know you’ve outgrown your advisor, but you don’t want that to be too far down the road,” Kearney says. “Before they get an advisor, or when looking for a new one, I think people really have to ask them, ‘Who is your typical client? Do you match my needs? Do you deal with a certain range of net worth and have minimums?’ People want to know if they’re working with an advisor that really understands them.”