One of the most difficult decisions to make when it comes to investing is whether changes need to take place and, if so, what needs to change. For some, it may seem like a question of changing advisors; for others, a question about changing the underlying investments. In some cases, both the advisor and the underlying investments will need to change, but first things first: how do we know which to change?
Change Your Advisor
Investors should switch advisors when it feels that their best interests are not directing the advisor’s recommendations and advice. This can come down to the advisor not taking an active interest in making sure you are on track to achieving all of your financial goals.
Some hints that this may be the case could be portfolio churning – buying and selling assets in order to generate a commission or better fees – non-responsiveness to voicemail messages or e-mail messages, recommending products that make you uncomfortable (either too high risk or too little risk), as well as a host of many other that leave you, the client, feeling that your needs are subordinated to the advisor’s insofar as your financial planning is concerned.
It should be noted that every advisor is different and you should always remember that you chose your advisor for a specific set of reasons. If there has been a change in how you feel about your advisor, determine whether it is the advisor him or herself or something else that the advisor can control.
Change Your Underlying Investments
With investments, this includes all financial products like insurance, estate planning products and a whole bunch of others.
You should make changes to your underlying investments when they are not helping you achieve your financial goals. For investments, this does not necessarily mean one period of poor performance, but two or three periods of performance that falls short of other investments in the same category or asset class. For insurance, this could be consistently higher premiums at renewal time.
This may all seem obvious, but many people will change advisors when the underlying products are what is under-performing. The thing is that, when changing products, the advisor’s analysis and expertise is required to help navigate through the many alternative options. Without the advisor, it would be virtually impossible to find a replacement that fits your needs specifically.
In summary, you change your advisor when your needs are being subordinated to the advisor’s and you change your underlying financial products when they fail to help you achieve your goals. The advisor can recommend products to help you reach your goals, but the advisor does not control those products.
By keeping these little tips in mind, you will save yourself from making unnecessary changes throughout your financial career and allow your advisor’s continued efforts to help you along your way.