I Need to Leave My Financial Advisor

[Seekwhat]

My FA is a close friend of the family. It was probably unwise to work with such a person, for one thing because terminating the relationship is necessarily complicated. I am not angry with him, and do not wish to hurt his feelings. I just don't feel the fees are worth it, I've developed my own investment philosophy that differs from his, and I want to manage my own money after 15 years of professional advice.

I plan to be upfront and say exactly the above, and also that I see now that our relationship is too important to me to believe it is wise to entangle in a business relationship.

However, he has shown that he intends to try to persuade me to stay with him. This is difficult. We will not agree, for example, on the merits of index funds (he describes them as "blunt instruments" in a difficult market, one he views as a "stockpickers market".) I don't agree, but don't see any purpose in debating the matter. Still, it is uncomfortable being put in a position to defend my reasoning when I'd rather not. If I didn't care about the relationship, it would be easier to be brusque about it. I have heard that advisors frequently caution departing clients that the time demands of doing an adequate job are prohibitive. Another point he raises. I have indicated my view is a very streamlined process of low fee index funds and ETFs, with attention to asset allocation, and periodic rebalancing.

There's really nothing to debate: it's a difference of opinion. The complicating factor is wanting to remain on good terms after. This may be unrealistic.

Any thoughts? Thank you.

[ieee488]

Why are you the one worrying about staying on good terms with him????

Cut the cord. It is YOUR money.

Or are you actually secretly afraid that he may be right, and that you are incapable of handling your own money?
If so, snap out out of it.

[SteveNet]

He's a paid professional that you no longer wish to pay for.
Family friend or not, if you wish to drop him and do it yourself and feel confident to do so then why pay him?
Especially if you want YOUR money invested differently.

The less you tell him how you are going to invest the less he can offer an argument against it.

[LadyGeek]

Welcome! I went through the same thing with my former Ameriprise Advisor. He established a close working relationship (meaning he got to be friends) with my friends. Long story short, he wasn't paying attention to my (and my husband's) accounts.

Remember that your advisor is acting as a fiduciary. You don't need his permission to move funds. So... I moved the money into Vanguard and cleared the accounts. It took him 2 weeks to discover that the funds were missing.

Don't worry about "how" to do it. Just call Vanguard and they'll take care of it. All you need to do is follow their instructions.

As to logistics, he was rather upset. However, he kept his anger between me and him. Shortly afterwards, things calmed down as he realized that further anger would not be productive. My friends don't know the details and we still see the advisor occasionally. All is OK.

I could have hit him hard by complaining to Ameriprise that his handling of the matter was unprofessional - but decided not to. Ameriprise has a compliance department, so they are very interested to know if one of their advisors is not upholding to a standard of conduct.

This is one of those things that needs to be done, and it's best to just state your intentions and get it over with. He knows that he can't stop you from moving the funds and it's in his best interest to just let it go.

[Calm Man]

I have a thought. If it was a very good friend, a very good friend, he would not be charging you fees. I could no timagine charging my best friends any fees. That said, my best friend is a lawyer and I am a doctor and we would never treat or advise one another as we are best friends. First, I would move on as you planned. Second, I think you can avoid all debates by telling him a white lie. You are not departing, (read this: NOT DEPARTING) because of philosophical differences on investment philosophy, asset allocation or whether there is a Higgs boson. Rather, you have recognized that a friend (or a friend of the family) cannot be your financial adviser as you at this point need to keep your finances private and free of the friendship. Here is the zinger: you also recognize how hard it is for him to charge fees to a friend and it is better for him to use his time with a non-affiliated client. There can be no argument to either of those and I would be fascinated if you told us that he said he had no problems charging you fees..

[JamesSFO]

It may pay to have filled out the asset transfer form with the new company, e.g. Vanguard, already and basically have the ACATS (asset transfer request basically) pending so that way it's already done.

Here was a letter a friend used when we switched his mom to Fidelity (low cost 5 fund portfolio) from Morgan Stanley:

As you are aware, over the last several months, we have been reviewing YOURNAME's financial requirements and evaluating various portfolio choices and investment strategies. After conducting considerable research and thoroughly analyzing our options, YOURNAME has decided, after much discussion and consideration, that her financial goals are best achieved by investing in a NEWCO managed portfolio. As a result, we will soon be transferring YOURNAME's financial assets from OLDCOD to NEWCO.

This decision has been difficult for YOURNAME and PRONOUN and the YOURFAMILYNAME family greatly appreciate the professionalism and dedication that you have shown over the years and are grateful to you for helping provide for the financial well-being of the YOURFAMILYNAME family. Thank you.

[LadyGeek]

^^^ I like the letter, but write it in past tense (" As a result, we have transferred YOURNAME's financial assets...") and don't say where you are going. Any delay will further the anger and give him an opportunity to block the transfer. Remember that he has friends...

As you are aware, over the last several months, we have been reviewing YOURNAME's financial requirements and evaluating various portfolio choices and investment strategies. After conducting considerable research and thoroughly analyzing our options, YOURNAME has decided, after much discussion and consideration, that her financial goals are best achieved by investing with another advisory firm. As a result, we have transferred YOURNAME's financial assets from OLDCOD.

This decision has been difficult for YOURNAME and PRONOUN and the YOURFAMILYNAME family greatly appreciate the professionalism and dedication that you have shown over the years and are grateful to you for helping provide for the financial well-being of the YOURFAMILYNAME family. Thank you.

[Fallible]

My FA is a close friend of the family. It was probably unwise to work with such a person, for one thing because terminating the relationship is necessarily complicated. I am not angry with him, and do not wish to hurt his feelings. I just don't feel the fees are worth it, I've developed my own investment philosophy that differs from his, and I want to manage my own money after 15 years of professional advice.

I plan to be upfront and say exactly the above, and also that I see now that our relationship is too important to me to believe it is wise to entangle in a business relationship.

However, he has shown that he intends to try to persuade me to stay with him. This is difficult. We will not agree, for example, on the merits of index funds (he describes them as "blunt instruments" in a difficult market, one he views as a "stockpickers market".) I don't agree, but don't see any purpose in debating the matter. Still, it is uncomfortable being put in a position to defend my reasoning when I'd rather not. If I didn't care about the relationship, it would be easier to be brusque about it. I have heard that advisors frequently caution departing clients that the time demands of doing an adequate job are prohibitive. Another point he raises. I have indicated my view is a very streamlined process of low fee index funds and ETFs, with attention to asset allocation, and periodic rebalancing.

There's really nothing to debate: it's a difference of opinion. The complicating factor is wanting to remain on good terms after. This may be unrealistic.

Any thoughts? Thank you.

I think you are right all the way in this: you have been both good client and good friend. The client part has ended for you, but not the friendship and whether that continues is now up to him. At some point, though possibly not until you begin to actually make the move, he has to realize this, that the client is gone, not the friend. I hope he values the friendship as much as you; if he doesn't, you haven't lost a friend. (And I hope you'll let us know how it works out.)

[Draak]

I think your approach sounds like the best thing to do. Be polite but remain firm in your decision. If your exchange becomes heated in any way, just stop and say I want to stay on good terms with you personally even if I am severing the business relationship, so lets not fall into an argument. This might go great or I might crash and burn, but I am going to do it. Your experience has been invaluable over the years, but I'm ready to fly on my own now.

[inbox788]

Any thoughts? Thank you.

How has the performance compared to sp500? Equivalent risk adjusted portfolio? Say over the last 5 or 10 years? Short term returns are meaningless. Also, be sure to properly adjust for pre and post fees as well as any dividends that may have been reinvested. Taxation is another complication factor, with higher turnover potentially higher tax, offset by tax loss harvesting.

You could make a friendly bet, say for a nice dinner to the winner with real investments. He invests 100,000k in his account today however he wishes, and you put yours in low cost index funds. In exactly 5 years, whoever has more wins.

Will be interesting which bogleheads portfolio is ideal for winning the most dinners.

[imagardener]

LadyGeek's reply is the best way to handle it.

You have already given him a heads-up, there is nothing else for you to say or do.
This is a business relationship first and foremost. It is his business and job to do everything he can to retain you as a client.
The more you continue talking to him the more he thinks you will stay. Disengage.

Have this done LadyGeek's way, the professional and unemotional way.
Do not send him a letter, email or anything in writing but do send a Christmas card with best wishes.
The next time you see him greet him as a friend and make no reference to moving your business. He would be wise not to say anything either.
Move your relationship back to "friend" status and talk about kids, vacations.

[neurosphere]

My FA is a close friend of the family.

I agree with Calm Man. If he is so close, why is he charging you? I could never, ever, consider charging a close friend or family member for my services. Over the years I have had many such offers to pay me for services rendered. I routinely help prepare taxes for friends and coworkers (I assist with about 10-20 tax returns a year). I have created detailed financial plans. I even have agent authorization over financial accounts for friends which I help them manage. I have never accepted a dime, even when pressed. Because once you start charging, the relationship changes. So I wonder why he ever charged you anything in the first place.

So tell your friend that over time you have simply become uncomfortable having a business relationship with such a close friend, and have come to the realization that it is best to keep such relationships separate. You don't have to tell him that it has anything to do with his fees, abilities, etc. It's simply a matter of principle, and you are applying the same rules to ALL your relationships: no more mixing business with friendship.

[MooreBonds]

I think you are right all the way in this: you have been both good client and good friend. The client part has ended for you, but not the friendship and whether that continues is now up to him. At some point, though possibly not until you begin to actually make the move, he has to realize this, that the client is gone, not the friend. I hope he values the friendship as much as you; if he doesn't, you haven't lost a friend. (And I hope you'll let us know how it works out.)

After you transfer your funds, you will find out if he truly is a friend or just someone using you and your friends to make money.

If the 'advisor' is truly a friend, he will remain a friend after you transfer your funds, and things will be great. If he is just using you for your money, he will react negatively...in which case it's clear that he never was really a friend to begin with, and you should not lose any sleep over cutting all ties (professional and personal) with him. If he starts talking to your common friends about you in a negative light, all you have to do is reply to your common friends "I thought Mr. X was a true friend, but it's clear that he isn't, because all I did was transfer my funds to a different provider and he has to attack me for this. I guess all he wanted me for was my easy money, because I would never treat my friends like that, and HE should never be treating his friends like that."

Or, conversely, ask your friends if you can demand that they suddenly start giving business to your employer for no reason other than the fact that you are friends with them, and you would indirectly benefit from their patronage (doesn't matter what your employer does - they should be willing to spend money needlessly in the same way the financial advisor expects you to spend money needlessly).

[goodenoughinvestor]

I recently let go my FA so I understand that it is difficult when the person in question is smart, kind and a friend (or at least, friendly). I strongly recommend that you NOT get into a debate with him--because that just leads to conflict. He won't be able to convince you, so what's the point? Simply tell him that you've given it a lot of thought and that you've decided you absolutely want to handle things on your own--you know he disagrees but don't want to debate it. You could tell him, "you may be right. I may come back with my tail between my legs. But I hope not and I hope you'll wish me luck!" Let him know all you want is his good wishes and continuing friendship. And, of course, let him know you're grateful for the help he's provided you over the years. Do that and you've acquitted yourself well. Whether he responds in kind is not something you can control, so not worth losing sleep over. Good luck!

[island]

I've developed my own investment philosophy..., and I want to manage my own money after 15 years of professional advice.....I see now that our relationship is too important to me to believe it is wise to entangle in a business relationship...

This and a whole hearted thank you and I think you said it all. Honest and to the point, not open to debate, end of story.

I'm sure he will try to persuade you. Not only because he would like to keep your business, but also because he honestly believes his way is the right way. As you said, you don't want to debate it so stand firm on that. The debate will only perpetuate the conversation and open the door to more attempts to persuade you. Like religion and politics, less said the better when you're on opposite ends of the spectrum, especially if you hope to keep the friend of family status.

Good luck and keep us posted how it goes. I'm sure we can all learn from your (albeit uncomfortable ) experience.

[Taylor Larimore]

My FA is a close friend of the family.

Seekwhat:

"A close friend of the family" would never try to make money from a friendship. In fact, they would give you their commission.

Your "close friend of the family" is revealing their character: They put money before friendship. A good friend would wish you well.

Simply state that you are going to invest on your own. Don't argue with them. They are well-trained to counter objections.

Never forget: It's your money--not theirs.

Best wishes.
Taylor

[BolderBoy]

However, he has shown that he intends to try to persuade me to stay with him.

So the Godfather was right - "This isn't personal, it's business." Since it is business, call up your new custodian (such as Vanguard) tell them what you want to do, give them all the documentation they need and they'll contact the present custodian and make it happen. Money frequently ruins friendships.

Your soon-to-be former advisor will be advised himself along the way.

In my experience, part of the schtick employed by some (most?) advisors is to try to become your friend so you'll have a personal attachment which is tougher to break when the time comes.

The process above will actually determine how much of a friend he really is.

[sambb]

would you, for christmas, write him a check for several thousand dollars? Depending on the size of your accounts and the 15 years, you probably are writing him that in fees. Cut the cord. And smile and be nice. But limit discussion of finances.

[Nowizard]

It seems to me that this decision is being made far too difficult. If the FA is a friend, talk to him like a friend. Friends have different opinions and views on many topics, just as friends come together on many topics. Simply tell him you are going to do your own investing. You can do this with a joking approach ("I learned so much from you that I feel ready to do this on my own") or with a more deferent approach ("I suspect you will think I am stupid, and I may be, but I feel I am ready to do my investing on my own"). I would strongly disagree with those who say just go ahead and transfer funds without mentioning it. Yes, it is your prerogative to do so, but your goal seems to be to invest for yourself AND to keep a friend. Friends do not make decisions that affect the other party significantly without discussion. That is not a friendly way to act. However, if he objects and uses what he has been trained to say, he is not acting in a friendly fashion at that point, and you can simply use the "broken record" response of, "I know you disagree, but I am going to try this, and I hope it will not impact our friendship." The reaction is up to him at that point, and you will discover whether he is a friend or just acting like one to get your business.

Tim

[Seekwhat]

You guys have been helpful -- thank you. Reluctantly, I have come to the conclusion that -- while I have allowed it -- he has been willing to use our friendship for his financial gain. No discussion of the impact on our relationship. In a similar situation with a friend, I would have said "Our friendship is too important to commingle with a business relationship. May I refer you to a trusted colleague?"

Thank you for the many perceptive comments. I intend to be firm, but direct, personal, have a discussion. I'm not going to just let him get a piece of paper in the mail, or the electronic equivalent. He left a message earlier, so I'll probably be having The Talk later tonight.

[placeholder]

I don't agree that a friend wouldn't charge you I mean if he was a carpenter you wouldn't expect him to install your cabinets for free. That's just muddying the situation.

[Nowizard]

Please let us know how the conversation went.

Tim

[Call_Me_Op]

If he is such a good friend, why is he trying to sell you a bill of goods? Or if he believes it, he does not understand the concepts of market efficiency and uncompensated risk. Either way, he is not looking good.

[tedgeorge]

I did this just a couple of months ago after making the decision in January. I wrestled with it too because I had become friends with my FA. In the end, we weren't close enough friends for him not to charge me to close out those accounts and his quarterly fee.

And hopefully you won't find yourself with funds that are not so easily liquidated/transferred. I've still got one I'm waiting on to move. All the more reason to take charge and make sure you understand what you are investing in!

[cherijoh]

If he starts to talk you out of the move, I would simply reply " I'm afraid you misunderstand. I have already made my decision. Since you are a good friend of the family, I wanted to give you a heads up before initiating the paperwork to make the transfer."

[placeholder]

Just say "I've been studying and I'm eager to do it on my own and if it doesn't work out I'll be back."

[Jason Hull]

Most of the "friends of the FA" have discovered that the FA was more interested in the money than the friendship once the money disappeared. I can't tell you how many clients I've had who have been afraid to move money from a high commission/high load/high AUM management situation to a DIY who were afraid of ruining the relationship they'd built up. I always said that if the friendship was a true friendship, it'll survive the move. Rarely was it a true friendship. Call me cynical, but most of them are trying to act like friends just so you'll keep giving them the AUM fees/commissions/whatnot.

[JW-Retired]

Perhaps we should have a poll. Once you had politely but completely left your old FA friend, did you ever hear from he/she again?
JW

[Taylor Larimore]

Bogleheads:

My former Merrill Lynch broker was also a good friend who used to take us out in his yacht (which we helped pay for). In 1986 I told him we were moving our investments to Vanguard.

We never again were invited to go sailing. . . .

Best wishes.
Taylor

[Raymond]

Bogleheads:

My former Merrill Lynch broker was also a good friend who used to take us out in his yacht (which we helped pay for). In 1986 I told him we were moving our investments to Vanguard.

We never again were invited to go sailing. . . .

Best wishes.
Taylor

I'm sure you have a yacht of your own now, despite his best efforts

[Watty]

A professional response once, it is clear that you will not be changing your mind, is that he would express his regrets and then to be pleasant and try to make it clear that you are always welcome to come back after you have tried investing on your own for a few years.

If you don't get that response then that should help you be certain that you are doing the right thing.

If this is a taxable account then one thing to be sure you do before you leave is to make sure you have all the cost basis information that you will need when you sell any of your investments. This might me much harder to get a few years from now when you are no longer their customer.

[Taylor Larimore]

I'm sure you have a yacht of your own now, despite his best efforts

Raymond:

Even if I could afford a yacht, I'd much rather leave my savings to my heirs and charity (like Mr. Bogle).

Happy Holiday!
Taylor

[montanagirl]

You guys have been helpful -- thank you. Reluctantly, I have come to the conclusion that -- while I have allowed it -- he has been willing to use our friendship for his financial gain. No discussion of the impact on our relationship. In a similar situation with a friend, I would have said "Our friendship is too important to commingle with a business relationship. May I refer you to a trusted colleague?"

Unfortunately, financial advisers, salesmen and multilevel marketers are expected to approach their friends and families FIRST and that's what I hate about sales. I couldn't do it and despise the ones who can. Social clubs are full of these hustlers. One year I was in a Rotary Club that seemed to consist entirely of FA's, realtors and charity heads. Needless to say, I didn't fit in and quit.

[Savvy]

You do not owe him/her a reason for leaving.

[Seekwhat]

So the deed is done. He did make an attempt to change my mind ("The markets are about to get very volatile, who knows what happens when the fed begins to raise interest rates: that's when it really helps to have professional advice; Vanguard has a stake in propagandizing the idea of low cost index funds because that's what they sell), but as I was very clear that I want to manage my money myself and did not get into a discussion -- denied being dissatisfied, merely ready to take it on myself -- he quickly said that it was clear my mind was made up. He did offer that I might consider transferring only a portion of my funds, and also that he would be willing to consult to me on an hourly basis if I wished. He agreed with my suggestion that we must make an active effort to continue the friendship because we won't have the business relationship to keep us in touch. We'll see. We have a number of friends in common from back in the day.

No taxable accounts, Watty -- thank you. Now I have to formulate a clear plan for the transition: how to liquidate most of it but arrange to transfer in kind the few things I'd like to hold on to; what asset allocation to select; which specific funds to choose; whether to dollar-cost-average in or not. If anyone has some good resources on this stuff, I'd be happy to be pointed in that direction Slight anxiety at going it alone, but more excited, and north of 1% in my pocket automatically as a result of the diminished fees!

Thank you everyone for the advice and support --

[kenner]

Seekwhat,

You have handled this situation masterfully.

Best wishes to you.

[Avo]

Now I have to formulate a clear plan for the transition: how to liquidate most of it but arrange to transfer in kind the few things I'd like to hold on to

It may be less expensive to transfer everything in kind, and then liquidate what you need to.

[BolderBoy]

Perhaps we should have a poll. Once you had politely but completely left your old FA friend, did you ever hear from he/she again?
JW

Never. Not a peep. Multiple advisors.

A friend, indeed...

[JW-Retired]

Now I have to formulate a clear plan for the transition: how to liquidate most of it but arrange to transfer in kind the few things I'd like to hold on to; what asset allocation to select; which specific funds to choose; whether to dollar-cost-average in or not. If anyone has some good resources on this stuff, I'd be happy to be pointed in that direction.

I always prefer not to liquidate anything myself as a precursor because you may be out of the market for a significant time. If you just tell Vanguard what the assets are and what Vanguard funds you want it to be invested in, it will happen in the transfer to Vanguard. You need not be out of the market for more than a day or two.

Take a look at Vanguards IRA Asset Transfer Kit/Form .... then give them a call. You can just mail in their form without even bothering to call but I wouldn't do that the first time you do this.
https://personal.vanguard.com/us/Litera ... dorID=S258

Welcome to low cost investing.
JW

[ddunca1944]

Now I have to formulate a clear plan for the transition: how to liquidate most of it but arrange to transfer in kind the few things I'd like to hold on to

It may be less expensive to transfer everything in kind, and then liquidate what you need to.

This is what I did when we moved our accounts from Smith Barney to Vanguard. Everything went to VG just as it was and I left it that way for 5-6 months while I read and studied. Then I started making gradual changes. Over time we went from 14 funds (including American Funds) to 4 Vanguard funds.

[Fallible]

Seekwhat,

You have handled this situation masterfully.

Best wishes to you.

I agree! I wish I'd had the Bogleheads to turn to when, many years ago, I left the family stockbroker for index funds and eventual DIY.

[Taylor Larimore]

Bogleheads:

I am reminded of when we moved from Merrill Lynch to Vanguard in 1986. Vanguard had no total stock market index fund and no total bond market index fund. Mr. Bogle had not written his first book. I bought 16 Vanguard mutual funds to be "diversified."

I wish there had been a Boglehead Forum to help me. It is the primary reason I helped start the Vanguard Forum at Morningstar in March, 2000.

Happy Holiday!
Taylor

[barnaclebob]

"The markets are about to get very volatile, who knows what happens when the fed begins to raise interest rates: that's when it really helps to have professional advice"

This is always my favorite argument for active investing. "nobody knows but you should still pay me"

[bengal22]

Paul Simon once said "There must be 50 ways to leave your advisor." Have a new plan stan and go out the back jack are two of them.

[kenner]

Bogleheads:

I am reminded of when we moved from Merrill Lynch to Vanguard in 1986. Vanguard had no total stock market index fund and no total bond market index fund. Mr. Bogle had not written his first book. I bought 16 Vanguard mutual funds to be "diversified."

I wish there had been a Boglehead Forum to help me. It is the primary reason I helped start the Vanguard Forum at Morningstar in March, 2000.

Happy Holiday!
Taylor

Taylor, after graduating from college with a degree in Finance, I remember researching mutual funds in the 1970s or early 1980s and reading a compendium by Sheldon Jacobs that had massive amounts of information about mutual fund companies. From the moment I read Mr. Jacobs definitive explanation of the mutual fund industry, I knew that John Bogle's Vanguard was the best deal for long term investors

[Taylor Larimore]

Kenner:

I am privileged to know Sheldon Jacobs personally and admire him greatly. This is his Biography:

Sheldon Jacobs began as an author and investment adviser. He wrote the first self-help book on no-load mutual funds. Published in 1974 by Simon & Schuster, “Put Money in Your Pocket” helped foster the growth of no-load funds. It launched a career that enabled him to found a popular investment newsletter, The No-Load Fund Investor, which was the number one financial newsletter in America for risk-adjusted performance for the 15 years ending June 2006. Jacobs is a member of Bottom Line’s investment advisory panel, was a founding advisor to Charles Schwab’s Financial Advisory Service Board, and has been listed in Who’s Who in America. He is now retired and living off his investments and Social Security.

Best wishes.
Taylor

[kenner]

Kenner:

I am privileged to know Sheldon Jacobs personally and admire him greatly. This is his Biography:

Sheldon Jacobs began as an author and investment adviser. He wrote the first self-help book on no-load mutual funds. Published in 1974 by Simon & Schuster, “Put Money in Your Pocket” helped foster the growth of no-load funds. It launched a career that enabled him to found a popular investment newsletter, The No-Load Fund Investor, which was the number one financial newsletter in America for risk-adjusted performance for the 15 years ending June 2006. Jacobs is a member of Bottom Line’s investment advisory panel, was a founding advisor to Charles Schwab’s Financial Advisory Service Board, and has been listed in Who’s Who in America. He is now retired and living off his investments and Social Security.

Best wishes.
Taylor

It is gratifying to see your post. There are probably no three men who have contributed more to my knowledge of wise investing than John Bogle, Sheldon Jacobs and Taylor Larimore. I know that God will bless each of you forever.

[island]

Seekwhat,

You have handled this situation masterfully.

Best wishes to you.

Agree!

[Seekwhat]

Seekwhat,

You have handled this situation masterfully.

Best wishes to you.

Agree!

Thank you! And hopefully that was the hard part!

[Raymond]

Congratulations!

Please let us know in several months if your friend has spoken to you at all (not including, "Please bring your money back to me!")