Leaving Advisor - Ethics Question? [Resolved]

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One Ping
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Leaving Advisor - Ethics Question? [Resolved]

Post by One Ping » Sun Feb 10, 2019 3:08 pm

A friend I’ve known for 30+ years (let’s call him “Steve”) is getting ready to pull the plug on his advisor in the next month or so. He has asked for my opinion on his upcoming actions with respect to his leaving this advisor.

Some important background. Steve has used this firm for about 15 years and is happy with them, their approach and his current advisor of about 5 or 6 years. The firm is a fiduciary. Part of this firm’s approach is that if you have other accounts they don’t manage for you they will provide, at no charge or obligation, advice on how you might structure those portfolios to use either their approach (slice & dice) or to complement the portfolio asset allocation managed by their firm. Steve has about ¼ of his portfolio (taxable & Roth’s) with this advisory firm, ¾ he manages himself (taxable & 401k). Never has he been pressured to transfer any of those accounts he manages to the advisor’s firm. He says he has spoken many, many times with his advisor about the other accounts and they have a free exchange of ideas about what he might do with them or how he might manage them. The advisor has always given Steve what he considers good, solid, unbiased advice. Steve has not always followed the advice, but he says that has not had an adverse impact on their relationship. His reason for leaving is that now that he is retired, he wants to minimize outgoing cash flow. He says that now that most of the ‘heavy lifting’ is done (account consolidation and conversions) he feels comfortable leaving the advisor, eliminating the AUM fee and moving the accounts from Schwab to Vanguard to manage them himself.

The departure scenario. He has asked for my opinion on the ethics of the following sequence of events for leaving his advisor:
1. Steve has a “state-of-the-portfolio” meeting set up with the advisor in a week or so. They will talk about any issues related to the account under management. He doesn’t think there are any in particular. They just completed tIRA  Roth conversions last year so it’s pretty simple now he says. RMDs don’t start for several years.
2. During this meeting, Steve wants to lay out his approach for managing his post-departure accounts in the context of how he might manage the accounts he already does by himself. He values and trusts his advisor’s opinions on these kinds of things. This would be a free give and take exchange of ideas. He does not plan to mention he is leaving at that time.
3. Shortly after that meeting (days, weeks?) he will arrange to remove the advisory firm’s management authority over the accounts they currently manage and some time later have Vanguard initiate a transfer of those accounts from Schwab to Vanguard.

His concern. “This seems slightly disingenuous, to ask for feedback on my go forward plan for how I will self-direct manage the accounts he is currently managing without him having a clue that next week those accounts and I will be gone.” Steve values the friendship with the advisor, trusts the firm and wouldn’t want to burn any bridges. The reason for this is, if he were to die first, one of the options his wife would have would be to go back to this firm. She has no interest in investment management and would likely want some hand-holding, he says.

Technically, I don’t see anything wrong with what he wants to do. It seems the advisor has offered ideas and feedback before on how to manage his self-directed accounts. I must admit though, it does seem like he asking under kind of false pretenses. Maybe he should just level with the advisor and tell him what’s going on, ask for his opinion and then move on. After all, one way or another, he’ll be gone in a week …

BTW, I agree with his assessment of the firm and their advisors. I too was a client many years ago and had the same experience. This question is NOT about the advisory, the firm or their asset allocation/management approach or the size of their AUM fee. It’s about his ‘exit strategy’.

What say the collective mind of the Bogleheads?
Last edited by One Ping on Mon Feb 11, 2019 2:11 pm, edited 1 time in total.
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miamivice
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Re: Leaving Advisor - Ethics Question?

Post by miamivice » Sun Feb 10, 2019 3:14 pm

That was a long post and I admittedly just skimmed.

However, there is not an unethical way of leaving an advisor unless you have a written contract that you are in violation of. You are free to leave an advisor however you like.

I don't see it different than when my daughter quit gymnastics. She gave gymnastics her all and was fun to have in class. Then one day she didn't want to do it anymore. I withdrew her per the contract. We did come back in one last time to say goodbye and to thank the instructors for their time, but there isn't an ethical or unethical way of quitting gymnastics lessons. The final goodbye was just a cuourtesey and not an ethics thing.

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Re: Leaving Advisor - Ethics Question?

Post by dbr » Sun Feb 10, 2019 3:18 pm

I wouldn't leave the advisor now and stick my wife with getting it all back together again upon my demise, if that is the plan.

I wouldn't have an annual review knowing I was going to walk out the next week. I don't know about ethics, but I wouldn't do that.

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Re: Leaving Advisor - Ethics Question?

Post by One Ping » Sun Feb 10, 2019 3:24 pm

dbr wrote:
Sun Feb 10, 2019 3:18 pm
I wouldn't leave the advisor now and stick my wife with getting it all back together again upon my demise, if that is the plan.

I wouldn't have an annual review knowing I was going to walk out the next week. I don't know about ethics, but I wouldn't do that.
Yeah, although he was thinking about doing LifeStrategy or Balanced funds at Vanguard and just calling it 'good enough.' Wife wouldn't have to do anything in the event of his demise other that calling Vanguard and having them 'send money' to the checking account.
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Re: Leaving Advisor - Ethics Question?

Post by retiredjg » Sun Feb 10, 2019 3:26 pm

It is disingenuous and Steve is not going to feel good about doing this no matter what people here think or say.

Instead, he could email his intention to leave to the advisor ahead of the meeting and simply say he would like to use their last meeting to plan the exit. The meeting might be shorter, but he will not feel like he needs a shower when he leaves.

If he wants to get a professional opinion about how he plans to manage his portfolio, he should state that and ask for an hourly rate for such a meeting.

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Re: Leaving Advisor - Ethics Question?

Post by 02nz » Sun Feb 10, 2019 3:31 pm

To me it also feels disingenuous. Why not just post his questions here? He'll probably get better advice. Can't beat our price either. :happy

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Re: Leaving Advisor - Ethics Question?

Post by Good Listener » Sun Feb 10, 2019 3:38 pm

I am disappointed that Steve would do this. He is taking up the advisor's time and benefitting from his/her advice when he fully intends to leave the advisor. I think it is unethical at the least. But he has to sleep with his actions and maybe he is comfortable doing things like this.

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Re: Leaving Advisor - Ethics Question?

Post by Good Listener » Sun Feb 10, 2019 3:38 pm

I am disappointed that Steve would do this. He is taking up the advisor's time and benefitting from his/her advice when he fully intends to leave the advisor. I think it is unethical at the least. But he has to sleep with his actions and maybe he is comfortable doing things like this.

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Re: Leaving Advisor - Ethics Question?

Post by fposte » Sun Feb 10, 2019 3:40 pm

I wouldn't. If he thinks the guy's management for the next year is important, he should pay advisory fees for the year. If he doesn't, he should move his account.

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Re: Leaving Advisor - Ethics Question?

Post by miamivice » Sun Feb 10, 2019 3:48 pm

I haven't used a financial advisor, but I think one can think of a "state of the portfolio" meeting as a sales pitch. This is what the advisor is offering in exchange for managing his funds for one more year. There is nothing wrong with listening to a sales pitch and declining the offer.

Just because Steve has accepted the offer many times in the past doesn't obligate him to accept this offer as well.

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Re: Leaving Advisor - Ethics Question?

Post by Dottie57 » Sun Feb 10, 2019 3:49 pm

fposte wrote:
Sun Feb 10, 2019 3:40 pm
I wouldn't. If he thinks the guy's management for the next year is important, he should pay advisory fees for the year. If he doesn't, he should move his account.
Agree.

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Re: Leaving Advisor - Ethics Question?

Post by J295 » Sun Feb 10, 2019 3:57 pm

Poor exit strategy.

Level with the advisor.

If I were this advisor with this good history and my client leveled with me on their transition out, I would gladly spend the extra time with them to dialogue and try and help them be successful in the future without me.

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Re: Leaving Advisor - Ethics Question?

Post by miamivice » Sun Feb 10, 2019 3:59 pm

J295 wrote:
Sun Feb 10, 2019 3:57 pm
Poor exit strategy.

Level with the advisor.

If I were this advisor with this good history and my client leveled with me on their transition out, I would gladly spend the extra time with them to dialogue and try and help them be successful in the future without me.
That'd also give you (as the advisor) one last chance to twist the arm of the client to keep on for another year.

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Re: Leaving Advisor - Ethics Question?

Post by Jack FFR1846 » Sun Feb 10, 2019 4:13 pm

If he's moving to Schwab, contact Schwab tomorrow and initiate the transfer.

There. That was pretty clean and easy.
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Re: Leaving Advisor - Ethics Question?

Post by nix4me » Sun Feb 10, 2019 4:23 pm

Just tell him. Remove yourself from my accounts, i will manage them myself. Done. No need to be dramatic or move to Vanguard. Schwab is fine.

Its a 10 second phone conversation or even email.

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Re: Leaving Advisor - Ethics Question?

Post by One Ping » Sun Feb 10, 2019 4:40 pm

Ok, I checked with Steve and I think the actual question is being missed by a lot of folks. Maybe I provided too much background.

The question has to do with Steve asking his advisor for the advisor's opinion on Steve's self-management plan for the funds the advisor is managing now after Steve leaves the advisor. Should Steve tell the advisor he is leaving when he asks for the opinion, or just couch the self-management plan in terms of how to manage the funds Steve already manages separately from the advisor?
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Re: Leaving Advisor - Ethics Question?

Post by One Ping » Sun Feb 10, 2019 4:42 pm

nix4me wrote:
Sun Feb 10, 2019 4:23 pm
Just tell him. Remove yourself from my accounts, i will manage them myself. Done. No need to be dramatic or move to Vanguard. Schwab is fine.

Its a 10 second phone conversation or even email.
Jack FFR1846 wrote:
Sun Feb 10, 2019 4:13 pm
If he's moving to Schwab, contact Schwab tomorrow and initiate the transfer.

There. That was pretty clean and easy.
Not relevant to the question asked.
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Re: Leaving Advisor - Ethics Question?

Post by One Ping » Sun Feb 10, 2019 4:44 pm

J295 wrote:
Sun Feb 10, 2019 3:57 pm
Poor exit strategy.

Level with the advisor.

If I were this advisor with this good history and my client leveled with me on their transition out, I would gladly spend the extra time with them to dialogue and try and help them be successful in the future without me.
I'm now leaning toward agreeing with you. Even though there is nothing wrong with not telling him, I think he will feel much better if he levels with the advisor.
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Re: Leaving Advisor - Ethics Question?

Post by One Ping » Sun Feb 10, 2019 4:47 pm

miamivice wrote:
Sun Feb 10, 2019 3:48 pm
I haven't used a financial advisor, but I think one can think of a "state of the portfolio" meeting as a sales pitch. This is what the advisor is offering in exchange for managing his funds for one more year. There is nothing wrong with listening to a sales pitch and declining the offer.

Just because Steve has accepted the offer many times in the past doesn't obligate him to accept this offer as well.
Not really the way these guys work. I was a client many years ago and that's not the way they work. We can debate whether they are worth the AUM price you pay, but not all advisors are evil scum.
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Re: Leaving Advisor - Ethics Question?

Post by One Ping » Sun Feb 10, 2019 4:48 pm

Good Listener wrote:
Sun Feb 10, 2019 3:38 pm
I am disappointed that Steve would do this. He is taking up the advisor's time and benefitting from his/her advice when he fully intends to leave the advisor. I think it is unethical at the least. But he has to sleep with his actions and maybe he is comfortable doing things like this.
Yeah, good point. Especially if he thinks his wife may need/want to go back to them after his demise.
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Re: Leaving Advisor - Ethics Question?

Post by retiredjg » Sun Feb 10, 2019 4:56 pm

The advisor has had hundreds of these "state of the portfolio" meetings, including many with Steve. The advisor will know something is off.

The likelihood that the advisor will not see through Steve's charade is miniscule. So if Steve does this, he will not only need a shower, he's going to look like a lying idiot.

What does Steve hope to accomplish by doing this?

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Re: Leaving Advisor - Ethics Question?

Post by One Ping » Sun Feb 10, 2019 4:58 pm

Steve has been lurking watching the responses roll in ... he wanted me to pass this along.

"I appreciate all the feedback. You've convinced me. Since we are leaving this advisor regardless, and we have a good relationship with him, I think I'll just level with him and tell him we are leaving, and why, and ask for his feedback on my go forward plan. To be honest, I think he will probably give good advice, wish us luck and say he's surprised we didn't do this earlier. Thanks."
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Re: Leaving Advisor - Ethics Question?

Post by SoonerD » Sun Feb 10, 2019 5:05 pm

One Ping wrote:
Sun Feb 10, 2019 4:40 pm
Ok, I checked with Steve and I think the actual question is being missed by a lot of folks. Maybe I provided too much background.

The question has to do with Steve asking his advisor for the advisor's opinion on Steve's self-management plan for the funds the advisor is managing now after Steve leaves the advisor. Should Steve tell the advisor he is leaving when he asks for the opinion, or just couch the self-management plan in terms of how to manage the funds Steve already manages separately from the advisor?
Matthew 7:12
In everything, treat others as you would want them to treat you, for this fulfills the law and the prophets.

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Re: Leaving Advisor - Ethics Question?

Post by Doom&Gloom » Sun Feb 10, 2019 5:07 pm

Dottie57 wrote:
Sun Feb 10, 2019 3:49 pm
fposte wrote:
Sun Feb 10, 2019 3:40 pm
I wouldn't. If he thinks the guy's management for the next year is important, he should pay advisory fees for the year. If he doesn't, he should move his account.
Agree.
+2

I would feel dirty following that plan.

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Re: Leaving Advisor - Ethics Question?

Post by 123 » Sun Feb 10, 2019 5:09 pm

It seems like Steve is "hooked" on this adviser's advice if he has to ask for more of it before severing the relationship. If he can't get himself comfortable with doing a simple 3 or 4 fund portfolio by himself he may not be ready to move away from the adviser. Likely the adviser has done some slice-and-dice or maybe added some individual stocks or slants in the portfolio (gold, healthcare, technology, etc) that Steve still believes add "Magic".

If Steve still needs an adviser without the high costs the best option is Vanguard PAS. He'll still have an adviser but they don't do much you couldn't do for yourself.
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Re: Leaving Advisor - Ethics Question?

Post by One Ping » Sun Feb 10, 2019 5:21 pm

123 wrote:
Sun Feb 10, 2019 5:09 pm
It seems like Steve is "hooked" on this adviser's advice if he has to ask for more of it before severing the relationship. If he can't get himself comfortable with doing a simple 3 or 4 fund portfolio by himself he may not be ready to move away from the adviser. Likely the adviser has done some slice-and-dice or maybe added some individual stocks or slants in the portfolio (gold, healthcare, technology, etc) that Steve still believes add "Magic".

If Steve still needs an adviser without the high costs the best option is Vanguard PAS. He'll still have an adviser but they don't do much you couldn't do for yourself.
I'm pretty sure Steve is now comfortable doing it himself. His main concern with leaving the advisor seemed to be how his financially dis-interested wife would fair should he shuffle off first. I'm not sure what he's thinking, other than maybe some one-fund solutions he's mentioned. I think that is what he wants to run by his friend/advisor. He seems to be relaxing though to being able to set something up where she would not have to do anything in that event. I would be interested in hearing what he plans, because I have some of the same concerns.

The advisor is basically a Fama/French slicer & dicer. All index funds. No individual stocks or other 'stuff.'

We have talked about PAS, he seems ambivalent about it.
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Re: Leaving Advisor - Ethics Question?

Post by radiowave » Sun Feb 10, 2019 5:25 pm

One Ping wrote:
Sun Feb 10, 2019 4:58 pm
Steve has been lurking watching the responses roll in ... he wanted me to pass this along.

"I appreciate all the feedback. You've convinced me. Since we are leaving this advisor regardless, and we have a good relationship with him, I think I'll just level with him and tell him we are leaving, and why, and ask for his feedback on my go forward plan. To be honest, I think he will probably give good advice, wish us luck and say he's surprised we didn't do this earlier. Thanks."
I agree.

Tell "Steve" he is welcome to join the forum and ask all the Bogleheads any questions he may have.
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Re: Leaving Advisor - Ethics Question?

Post by One Ping » Sun Feb 10, 2019 5:37 pm

radiowave wrote:
Sun Feb 10, 2019 5:25 pm
Tell "Steve" he is welcome to join the forum and ask all the Bogleheads any questions he may have.
I have! :happy He's kinda old school when it comes to online and pretty much of a shy introvert. Which may actually be what was causing his concern in this case ... concerned it might end up in a confrontation.
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Re: Leaving Advisor - Ethics Question?

Post by J G Bankerton » Sun Feb 10, 2019 5:45 pm

One Ping wrote:
Sun Feb 10, 2019 3:08 pm
It’s about his ‘exit strategy’.
Easy, just say; YOU'R FIRED accompanied by a finger point. I assume there is no emotional attachment.

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Re: Leaving Advisor - Ethics Question?

Post by HueyLD » Sun Feb 10, 2019 5:57 pm

The key point is that Steve likes his advisor and has received valuable service from the advisor. It also appears that the advisor is relatively ethical.

If his wife is totally not into investing, he needs to have a backup plan for her in case he is gone first. I have seen widows being taken advantage of by smooth talking salesmen and the widows ended up buying into expensive and complicated investment schemes. Those salesmen know how to earn the widows' trust by acting like their long lost sons while the real sons may be too busy or too far away. Be careful what you wish for.

Steve needs to ask his wife instead of a bunch of strangers.

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Re: Leaving Advisor - Ethics Question?

Post by URSnshn » Sun Feb 10, 2019 6:05 pm

I'd be upfront upfront about it.

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Re: Leaving Advisor - Ethics Question?

Post by labguy » Sun Feb 10, 2019 6:11 pm

Steve needs to really think this through a bit more, it’s very slippery. Man up and deal with this face to face and tell the advisor his reasons for leaving. Anything short of that is disingenuous, and surely don’t put the advisor through more work since he is firing him.

That said, no reason not to move ahead w/o an advisor, just need to do things the right way.

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Re: Leaving Advisor - Ethics Question?

Post by One Ping » Sun Feb 10, 2019 6:20 pm

HueyLD wrote:
Sun Feb 10, 2019 5:57 pm
The key point is that Steve likes his advisor and has received valuable service from the advisor. It also appears that the advisor is relatively ethical.

If his wife is totally not into investing, he needs to have a backup plan for her in case he is gone first. I have seen widows being taken advantage of by smooth talking salesmen and the widows ended up buying into expensive and complicated investment schemes. Those salesmen know how to earn the widows' trust by acting like their long lost sons while the real sons may be too busy or too far away. Be careful what you wish for.

Steve needs to ask his wife instead of a bunch of strangers.
Huey, I believe you have captured the essence of his situation and concern [emphasis above]. They have no children, so no long lost sons to show up. :happy Good point about asking he wife what she would want. I assumed he had done this and that was what was driving his approach, but ... :?:
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Re: Leaving Advisor - Ethics Question?

Post by One Ping » Sun Feb 10, 2019 6:22 pm

labguy wrote:
Sun Feb 10, 2019 6:11 pm
Steve needs to really think this through a bit more, it’s very slippery. Man up and deal with this face to face and tell the advisor his reasons for leaving. Anything short of that is disingenuous, and surely don’t put the advisor through more work since he is firing him.

That said, no reason not to move ahead w/o an advisor, just need to do things the right way.
:thumbsup Although, it sounds like the advisor would give him his honest opinion on his plan.
Last edited by One Ping on Sun Feb 10, 2019 6:23 pm, edited 1 time in total.
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Re: Leaving Advisor - Ethics Question?

Post by One Ping » Sun Feb 10, 2019 6:23 pm

URSnshn wrote:
Sun Feb 10, 2019 6:05 pm
I'd be upfront upfront about it.
That seems to be the consensus. :beer
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Re: Leaving Advisor - Ethics Question?

Post by diy60 » Sun Feb 10, 2019 6:38 pm

OP, to be blunt, Steve's exit strategy is dishonest and disingenuous. I've been a diy investor for several decades, but I too have a spouse uninterested in finances. Before retiring and in a moment of weakness we jointly decided to move our assets to an AUM advisor. After 12 months of misery we moved the assets back under our control. I have spent the last 3 years unwinding the mess created in our taxable account. My advise would be as follows:
1. Use the destination custodian to initiate the transfer.
2. Do not meet with current advisor, in fact do not contact advisor. Steve will only come away feeling like he just kicked his dog. And be asured, when the transfer requests are rec'd, Steve will be getting a call from advisor anyway.
3. Several times per year, Steve and spouse should sit down in front of the computer and have spouse do the full sign-in steps. Have spouse poke around and describe what the accounts are, how much funds, etc. Then, have spouse do a sell and electronic transfer of some amount to checking account (or wherever). Amount or need is unimportant, just do the transactions to improve familiarity with the accounts and process.
4. Forget all of the slicing and dicing, stick to a couple of funds. In fact, treat all assets as one married portfolio basket. As such, you could have a single fund in each account. Simplify, simplify, simplify.

Best of luck to Steve.

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Re: Leaving Advisor - Ethics Question?

Post by htdrag11 » Sun Feb 10, 2019 6:51 pm

That is not the path I would have chosen.
About 3 years ago, I left my advisor who managed my account for about 10 years. We left on good term. His fee was under 1% AUM. I did arrange a face-to-face meeting and told the advisor that I was retiring, so I took over the account myself. At the time I also had a smaller Vanguard account. I did not ask for additional financial advice upon leaving. My current portfolio is mainly in the Vanguard Balanced Income Fund, too lazy to rebalancing a 3-fund portfolio.
How about your friend putting himself in Steve's shoes? How would he react?

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Re: Leaving Advisor - Ethics Question?

Post by miamivice » Sun Feb 10, 2019 7:26 pm

One Ping wrote:
Sun Feb 10, 2019 4:47 pm
miamivice wrote:
Sun Feb 10, 2019 3:48 pm
I haven't used a financial advisor, but I think one can think of a "state of the portfolio" meeting as a sales pitch. This is what the advisor is offering in exchange for managing his funds for one more year. There is nothing wrong with listening to a sales pitch and declining the offer.

Just because Steve has accepted the offer many times in the past doesn't obligate him to accept this offer as well.
Not really the way these guys work. I was a client many years ago and that's not the way they work. We can debate whether they are worth the AUM price you pay, but not all advisors are evil scum.
I didn't say evil scum anywhere in my posts.

Financial Advisors, like real estate agents, are indeed salesmen / saleswomen. They do indeed have a product to sell and they do indeed pitch their product on you. The fact they are trying to sell you something doesn't make them evil scum, but don't forget who is paying them. The exception are financial advisors that work on hourly rates where you pay them by the hour.

Even Vanguard sucumbs to this issue. When I used to get "year end checkups" on my Vanguard portfolio ($500 value at no cost to valued Flagship customers), they often encouraged me to move from whatever I was invested in to Vanguard mutual funds. Probably not concidential.

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Re: Leaving Advisor - Ethics Question?

Post by Steelersfan » Sun Feb 10, 2019 7:37 pm

If he's going to leave, then leave. Do not take up his adviser's time and ask for his expertise on the way out.

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Re: Leaving Advisor - Ethics Question?

Post by BL » Sun Feb 10, 2019 8:16 pm

Steelersfan wrote:
Sun Feb 10, 2019 7:37 pm
If he's going to leave, then leave. Do not take up his adviser's time and ask for his expertise on the way out.
+1
Treat him the way you would want to be treated. Write a nice thank you note to let him know you are leaving. Don't waste his time if you won't be his client. Don't burn your bridges by acting otherwise (especially if spouse might someday want to go back to him). The same advice is often given to someone quitting a job. Your reputation and self-respect are worth so much.

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Re: Leaving Advisor - Ethics Question?

Post by birnhamwood » Sun Feb 10, 2019 9:33 pm

"Steve has used this firm for about 15 years and is happy with them . . "

Have Steve's 15-year portfolio returns beat those of his advisor? If so, he has good reason to leave, one his advisor will certainly understand.

If not (and considering his wife's situation) leaving might not be the best idea.

Leemiller
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Re: Leaving Advisor - Ethics Question?

Post by Leemiller » Sun Feb 10, 2019 10:03 pm

I’m confused by the “free exchange of ideas” actually one person is a paid professional giving their advice to a client. I would not behave in this manner upon no longer using those professional services. But overall this seems short sighted if his wife wants to use the company later. For what is probably a marginal drag on returns, it may be worth keeping the relationship rather than hoping she ends up with a good advisor if her husband passes first.


venkman
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Re: Leaving Advisor - Ethics Question?

Post by venkman » Sun Feb 10, 2019 11:05 pm

One Ping wrote:
Sun Feb 10, 2019 3:08 pm
The firm is a fiduciary. Part of this firm’s approach is that if you have other accounts they don’t manage for you they will provide, at no charge or obligation, advice on how you might structure those portfolios to use either their approach (slice & dice) or to complement the portfolio asset allocation managed by their firm. Steve has about ¼ of his portfolio (taxable & Roth’s) with this advisory firm, ¾ he manages himself (taxable & 401k).
Steve has effectively been taking this firm's advice for years at a self-made 75% discount, and he's worrying about ethics NOW?

On the other hand, the rules are what they are. I have no ethical qualms about holding a no-fee credit card that I pay off every month, or going to the grocery store and only buying that week's loss leaders. I imagine this advisory firm has made plenty of money off Steve over the years.

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celia
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Re: Leaving Advisor - Ethics Question?

Post by celia » Sun Feb 10, 2019 11:58 pm

Steve has already been managing 3/4 of his portfolio and can certainly manage 100% of it. Since he apparently recently retired, he needs to simplify things and get it all in one place. If he hasn't done estate planning yet (wills, trust, POA, etc), that should be his next project to do with his wife.

If Steve has never considered what his 401K (tIRA) RMDs will do to his taxes at age 70.5 and the advisor has never brought it up, the advisor did HIM a disservice. Maybe, tax-wise, it doesn't matter if he does further Roth conversions between now and then, but at least the analysis should have been done (as we've often spoken about here).

Steve should not worry so much about leaving the advisor. If he happens to die before the scheduled meeting, he would have, in effect, also left him. (Sorry to be so blunt.) So Steve should just explain that he is glad for the advisor's service all these years, but it is now time to simplify everything and go enjoy retirement.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

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jakehefty17
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Re: Leaving Advisor - Ethics Question?

Post by jakehefty17 » Mon Feb 11, 2019 11:51 am

If I were Steve, I'd feel a lot better about it if I just managed my own portfolio at Schwab without the advisor. That way if the wife needs to later, she can see this advisor that he's been happy with later on. Schwab is a fine broker and has many index funds, certainly he could build a comparable portfolio there?

Although there's nothing ethically wrong with it, the fact that he's changing brokers when he's happy with the service seems dramatic. Managing the portfolio at Schwab himself would be a nice middle-ground in my opinion. Is there a specific reason for the broker change?

In any case if it feels wrong it probably is. Whatever Steve decides he should just be upfront with the advisor and stick to his guns. Don't milk it.
"The problem with the world is that the intelligent people are full of doubts, while the stupid ones are full of confidence." -Charles Bukowski

renue74
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Re: Leaving Advisor - Ethics Question?

Post by renue74 » Mon Feb 11, 2019 12:24 pm

I've never understood these posts. The "I've been with my FA for years and how do I leave him gently?"

I left my FA in 2015. I was paying her $12,500 per year to manage our portfolio. I emailed her and told her that we will handle our portfolio going forward and it wasn't anything she did to spur the change. She emailed back and thanked me for letting her know and waived the last quarter's fees.

The next day, I contacted Vanguard and did all the paperwork. 3 weeks later, all the in-kind transfers were completed.

Why is it so difficult to leave a FA? It's the weirdest thing to me to just not do it and don't look back.

Let's be honest, a lot of these FA have a huge portfolio. My FA was a single practitioner who had over $150M under management. I feel like I'm not taking any bread and honey off her dinner table.

I own a small web design firm. We have clients come and go. We've been "let go," with official certified USPS letters all the way down to being let go with simple 1 sentence emails from a client's iPhone. Yes...it stings a little and in my mind I always do a "post mortem" of what went wrong. But you know...keep moving forward.

Long story short...if Steve wants to leave, he should intiate the transfer of his portfolio in-kind to the brokerage of his choice and follow up the same day with either an email or phone call to the FA indicating that. Stop beating around the bush.

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Re: Leaving Advisor - Ethics Question?

Post by pkcrafter » Mon Feb 11, 2019 12:31 pm

One Ping wrote:
Sun Feb 10, 2019 4:40 pm
Ok, I checked with Steve and I think the actual question is being missed by a lot of folks. Maybe I provided too much background.

The question has to do with Steve asking his advisor for the advisor's opinion on Steve's self-management plan for the funds the advisor is managing now after Steve leaves the advisor. Should Steve tell the advisor he is leaving when he asks for the opinion, or just couch the self-management plan in terms of how to manage the funds Steve already manages separately from the advisor?
1. WHY is Steve leaving the advisor? It doesn't sound like he's actually made a final decision on leaving.
2. If Steve is going to leave, he has to do just that and not ask the advisor his opinion on his future strategy. Steve would not feel he needs to talk to the advisor IF he has developed a sound strategy. Steve should consider discussing what he now has and what he wants to do with the Boglehead community. Bogleheads are not biased, the advisor is, whether Steve thinks so or not.
3. If, when Steve does decide to leave, he should contact the company he wants to go with and they will initiate a custodian to custodian transfer.
4. If Steve wants the advisor's opinion/blessing he should just stay with him.
4. This is a difficult situation because we Bogleheads don't have sufficient information. Steve (or you) needs to post his information according to the suggested posting format.
5. How much is the advisor paid?

Posting Format

viewtopic.php?f=1&t=6212



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Jack FFR1846
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Re: Leaving Advisor - Ethics Question?

Post by Jack FFR1846 » Mon Feb 11, 2019 12:32 pm

Steve is ready to do it on his own. He doesn’t need this meeting any more than he needs a bad chicken dinner annuity meeting. As I already said, move today.
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One Ping
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Re: Leaving Advisor - Ethics Question? [Resolved]

Post by One Ping » Mon Feb 11, 2019 2:10 pm

Jack FFR1846 wrote:
Mon Feb 11, 2019 12:32 pm
Steve is ready to do it on his own. He doesn’t need this meeting any more than he needs a bad chicken dinner annuity meeting. As I already said, move today.
Interesting you say this. Just got off the phone with him and this is, essentially, what he said! He may just give him a courtesy call and then be done with it. No sense totally burning the bridge since there is no animosity and his wife may feel the need to give them a call in the future.
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