Trusted Regina’s Financial experts share a tip on how to break up with your Financial Advisor - PART 2:
If you are looking for compensation, consider contacting the Ombudsman for Banking Services and Investments, a dispute-resolution service for banking services and investment clients. OBSI receives about 8,000 complaints a year and launches 600 to 800 investigations. They will try to facilitate a settlement and if one cannot be reached, they will write a report and make a non-binding recommendation. They can recommend restitution of up to $350,000.
Suitability is the biggest complaint (the next most common complaint is that fees are not properly disclosed), says Tyler Fleming, OBSI’s director of communications.
“Advisors and their firms have an obligation to make sure that the investments that they recommend are consistent with the client’s investment objectives, risk tolerance, financial circumstances,” he says.
“Lets say there’s a young couple who is looking to buy a house in six months and they need their savings in a safe, low-risk product. Their investment advisor puts them in something that is high risk and they lose the money that was meant for their down payment, that might be an instance where we would find it was unsuitable.”
You can take efforts to minimize conflict, he says. Take notes at meetings. Get everything in writing. Keep copies of your documents. Ask questions if you do not understand. Review your account statements. Bring someone with you who understands. Have a regular dialogue with your advisor about your changing goals — this may affect your investment plan.
“Trust your gut. When you have a feeling that something is wrong, don’t be afraid to raise that with your advisor,” Mr. Fleming says.
If things are not working out, you can either just walk away and let your new advisor deal with the transition or send a Dear John letter:
“Thank you for your help in the past. I will be going in another direction. I will no longer be needing your services. I wish you well in your future,” Ms. Waite says. “This is a good lesson in life. This is not personal,” Ms. Waite says. “Send a nice ‘thank you’ note and move on.”
Be aware that you do not have to sell your investments when you fire your advisor. If the advisor has used widely available funds such as Fidelity or Trimark funds, you can move them “in-kind” to another advisor, Ms. Waite says. You may get charged an administration fee.
However, some fund companies such as Primerica and Investors Group sell their own products and an advisor at a different company may not work with them; you can opt to find another advisor within the company.
If you want to leave the fund company, make sure you contact the firm to ask what fees you may pay if you sell your funds; a typical deferred sales charge (a back-end fee that is charged to a mutual fund investor if they redeem their investment prior to a set amount of time) starts at 6% of your initial investment in year one, declining to 0% by year seven.
You can also leave your account as is and move the money when the DSC expires or gets lower; each year, you can take out 10% of the original amount invested without being charged a DSC. Take note, your next mutual funds representative may want you to transfer your funds because she gets a commission, Ms. Waite adds.
“There are often more options than people think there are. Don’t just panic and cash out.”