Change can be a good thing.
The financial-advising profession has seen tremendous change over the past decade or so. There are a growing number of individuals providing financial advice (and with a growing array of qualifications), new ways to receive the advice, and different ways to pay for that advice.
So the adviser--and advice--who was a good fit for you 10 years ago, may no longer be a good fit now. Even if you have no major complaints about the service you have been getting, it is a good idea to “shop around” every few years. You may not realize that you are missing out on better advice or costs until you do a comparison. Conversely, you may reinforce that the adviser you have still is the best fit.
Consider that it’s a best practice for the big 401(k) plans to put the plan out to bid every three to five years to make sure they are getting the most competitive pricing and that the services provided align with what investors want.
While I’m not suggesting you follow the exact same timetable, I am suggesting that you take a step back every few years, re-evaluate the landscape, and make sure whatever and whoever you’re paying is generating the right amount of value.
The first step is to re-evaluate your personal changing landscape. Are you newly married, divorced, a new empty nester? Did you just have children? Are the kids in college? Or did they move out of the house? Did you get a new job, a raise--or even a pay cut? People often don’t think about their advisers in the context of whether they’re fit to take them through a series of planned--and unplanned--major life changes. You need to judge the relationship based on what an adviser can do for you in your current and future situations, not just based on what he or she has done for you in the past.
Next, re-evaluate your investing comfort--and if it has changed over the past few years. If you’re more comfortable managing your portfolio, or investing in some type of prepackaged portfolio like a target-date fund, you might be able to pay significantly less if you work with a planner that charges an hourly fee for financial planning vs. someone who charges based on assets managed.
Or, if you don’t necessarily need to meet with someone in-person and would be comfortable working with someone primarily over the telephone or online, it might be worth considering a robo-adviser. The number of options and depth of services of robo-advisers have increased significantly over the past few years. In fact, robo-advisers may not have been an option the last time you shopped around.
On the other hand, you may now have a financial portfolio or financial situation that could benefit from a higher level of engagement with an adviser.
Another thing to re-evaluate is fees. Asset-based fees, where financial advisers typically change about 1% of assets, are increasingly common. While that percentage hasn’t changed much among advisers, the expenses on top of that fee, such as mutual fund and ETF expense ratios, have come down significantly. So you want to be sure that the fees you are paying an adviser reflects that. Sure, a 2% total fee might not sound like much, but it will eat away at investments. For a portfolio worth $250,000, that’s $5,000 a year.
With robo-advisers, it’s also important to shop around as there always are new entries into this growing space.
Finally, if you decide to make a move, it’s important to understand a person’s qualifications, given the ever-growing alphabet soup of designations. In my opinion, the gold standard financial-planning designation is the certified financial planner designation. CFP designees have demonstrated the required knowledge and experience and are required to put a client’s best interests first (i.e., be a fiduciary). And if your current adviser isn’t a fiduciary, it might be time to re-evaluate.
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