5 signs it may be time to get a second financial opinion

Imagine you have a terrible pain in your side that just won’t seem to go away. Upon going to your doctor for a checkup, you’re told that everything looks “fine” and to just keep doing what you are doing.

You follow your doctor’s instruction and wait it out. Unfortunately, as time passes, your pain gets worse. Feeling helpless, you pick up the phone to get a second opinion. 

Sound familiar? It’s not uncommon to seek the advice of multiple doctors to get to the root of a medical problem. While it should be the norm in other industries, unfortunately, it’s not. 

People rarely seek a second opinion for their financial situation. The reasons vary, but they typically boil down to feelings of complacency, fear, or guilt.

If you ever feel like you are stuck in a relationship with a financial professional that you can’t get out of; or, if you are just curious to see what else is out there, read on to discover what red flags should warrant a change.

Poor communication 

The best financial planners put communication at the very heart of their business. In fact, a survey by Money Magazine found that 72% of clients fired their advisors due to poor communication. 

This is especially true for new advisors who are still building their book of business. Their time is typically focused more on bringing in new clients and less on nurturing those they already have.

Of course, poor communication can happen with any advisor, no matter their stripes. Professionals at any point in their careers can fail in this critical area. Just remember, a good adviser will never waiver in their commitment to keeping you in the loop—during good times and bad. 

They do more talking than listening 

Most financial institutions train their people well in the art of selling, but perhaps they should add Listening 101 to the syllabus. Listening is an often underrated skill, yet a vital one for an advisor to properly do their job. After all, it’s their duty to give you potentially life-changing advice. Of course, they can’t do this if they aren’t hearing you out.

So, if you find yourself faced with a barrage of charts, graphs, and foreign acronyms—or, if you can barely get a word in edgewise—there’s a pretty good chance you aren’t being heard. 

Your life has changed, but your portfolio hasn’t

Major life events happen all the time—and when they do—they normally alter our financial situation. For example, most of my clients plan to enjoy their retirement by using some of their hard-earned money for big purchases like a vacation home, a child’s wedding, or a membership at a golf club. As long as I am notified of these events in advance, my team and I will prepare a plan to make sure the funds are available when the time comes. 

Far too often, advisors hold on to the mindset that their clients (especially those at or nearing retirement age) are still in the “accumulation phase” instead of the “distribution phase.” This is risky business because peoples’ lifestyle needs tend to change as they get older.

Their correspondence is transaction-based

This one goes back to the section on communication. If the only time you hear from your wealth manager is when they want to make a change to your account (e.g., a trade), then there is a good chance they are putting their best interest over yours.

If this is the case, it’s crucial to figure out how your advisor makes money. Some earn a commission on items they sell; others charge clients a fee for managing assets (investment advisory firms typically charge around 1%). While there is no right or wrong method, many clients prefer a fee-based advisor that does well when their clients do well, which also mitigates conflicts of interest since the registered investment advisor is bound by standards to act in your best interest.

Cookie-cutter offerings

In financial planning, one size never fits all. Your situation is different from the next, and your retirement plan should reflect that. 

Sadly, cookie-cutter portfolios (typically consisting of only mutual funds) are becoming the norm. Big wirehouses provide these “model portfolios” to their salesforce so they can do more selling and spend less time learning. Unfortunately, this method can lead to higher fees for the investor and investment recommendations that don’t meet their objectives. 

When an investor is put in a cookie-cutter portfolio, they are likely to be invested in assets that do not align with their risk tolerance or investment goals. This can lead to frustration and disappointment, especially if the market takes a downturn and the investor’s portfolio loses value.

A financial advisor who takes the time to understand your individual needs can create a personalized investment plan that will help you achieve your financial goals. This is the best way to ensure that you are comfortable with your portfolio and feel confident about your investment choices.

Conclusion:

People are often hesitant to ask for help when it comes to their finances, but it’s important to get a second opinion. Sometimes all it takes is another set of eyes looking at your financial situation to see the red flags you may have missed. If you feel like you’re in over your head, don’t hesitate to reach out for help. There are plenty of people who want to see you succeed and will be more than happy to offer their financial advice.

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