A financial advisor that doesn’t live up to expectations can leave you wanting. Here are five signs that tell you it’s time for a change.
It’s curious to think about, but your financial advisor might just be one of the most important people in your life.
A good financial advisor has the potential to be your confidante, cheerleader and well, advisor. It’s one of the first people you inform in an emergency, and perhaps one of the very few who truly know your hopes, fears, dreams and struggles.
Everyone needs a good financial advisor, but not every financial advisor is good for you, is what we’re saying.
And just like with any other relationship, if the other party isn’t fulfilling their end of the bargain, it might be time for a change.
Here are five signs that indicate when you should consider looking for a new financial advisor.
1. They keep trying to sell you something
Many financial advisors work on a commission basis. This means that they only earn money when they sell an insurance policy, and thus have to close a certain number of sales every week or month.
It is, therefore, expected that your financial advisor would approach you with new plans or products from time to time. There’s no harm in asking, after all, you just might be interested in this new plan or rider.
However, if it seems that every single time you hear from your financial advisor they have something to sell you, that’s probably a red flag.
It’s not just incredibly annoying — your financial advisor may be involved in some shady practices.
For instance, they might have just joined a new firm or company and are trying to poach customers. Or, they could be attempting to pump up their sales numbers artificially — a disallowed practice known as ‘churning’.
Even if your financial advisor is just simply being overly ambitious, it is frustrating to be at the receiving end of endless sales pitches. They should be putting their energy into expanding their client base, and not nagging your ear off every other month or so.
If your financial advisor isn’t taking no for an answer, it might be time to fire them.
2. They are unwilling to meet your budget
Because we all have different needs and budgets, insurance is meant to be flexible. You choose the level of protection you can afford, and pay for it accordingly. And when you’re ready and able, you can always purchase additional policies to beef up your coverage,
Despite this, it is common to find financial advisors providing just a few fixed options when it comes to life insurance or endowment plans. While this is often presented as being done for your convenience, the real reason is to expedite the sale of the policy.
This isn’t necessarily a problem if the options fall within your budget. But if you’re being given premiums that are too costly for you, or being pushed to take up a plan that costs more than you want to pay for, you should be wary.
A good financial advisor would work to create an insurance portfolio that is aligned with your needs and your budget. Technically, there’s no such thing as a ‘fixed’ plan, and insurers can adjust their proposal to meet your needs.
But, if your financial advisor flat out refuses to find alternatives, and ignores your budget constraints, they are very likely not as invested in your interests as they are their own.
3. They can’t clearly explain the products they recommend
Insurance isn’t the easiest to explain, but a competent financial advisor should be able to explain the plan or product they are recommending, in a way that is simple to understand.
The degree to which they can — or cannot — ELI5 (“explain like I am 5”) will tell you how much they know about the policies they are selling. This is crucial, because not knowing everything about the plan can possibly lead to you signing up for something that is less than ideal. More on this later.
Also, the ability to clearly and simply explain an insurance policy can tell you the level of experience your financial advisor actually has. You may find this important when ascertaining whether they can reliably serve your needs over the long term.
4. They gloss over possible pitfalls
After hearing about your goal to grow a nest egg for your retirement, your financial advisor may propose buying into an Investment-Linked Plan (ILP). Well, that’s what ILPs are for, and they’re just doing their job by suggesting them.
However, before signing you up, they should have a thorough discussion with you on the opportunity cost involved. See, choosing to pay S$500 every month into an ILP for the next 20 years also means that you’ll have that much less money to spend on other things that you might need or want.
Might your retirement goal be better achieved another way, such as by buying term insurance (which costs less but provides comparable insurance protection) and investing the rest of your budget in other instruments? Or, perhaps by upgrading your qualifications in order to improve your career prospects?
This is one example of how financial advisors tend to gloss over potential pitfalls in favour of a potential sale. Perhaps that’s too harsh — it might be too idealistic to expect them to forego their own commissions (ILPs tend to pay better commissions than term life policies, in this example).
To be sure, we’re not saying financial advisors should actively discourage you from purchasing ILPs, or any other insurance products that are objectively beneficial to your circumstances. (Or at least, in their judgement).
However, it must be said that a trustworthy financial advisor would actively and voluntarily discuss the potential pitfalls of your choice, and only let you proceed when you’ve been suitably forewarned.
After all, isn’t the role of a financial advisor to steer you away from making bad financial decisions?
5. They don’t understand your needs
It feels like we’ve been bashing financial advisors a lot throughout this article, so let us try to balance things out a little in this last point.
Financial advisors have it tough (I should know — I lasted only six months). One of the most important and challenging aspects of the job is to convert your client, because again, commissions are how you get paid.
This is a multi-layered task that takes some serious skills, and there is nothing simple or easy about it.
You need to build rapport, gain trust, make appropriate recommendations, and convince them to sign on the dotted line — often within one or two meetings! (Don’t even get me started on the sheer impossibility of getting someone to sit down and listen to you in the first place.)
So it is with the utmost empathy that we say this next.
Whether due to inexperience, personality traits, meddling by their managers (who may be facing pressure to bring in sales or sell more of a particular type of policies — hey, insurance companies exist to make money after all), or for whatever reason, some financial advisors just can’t quite understand or meet your needs.
This can happen even if it’s someone you know, such as an ex-schoolmate or a personal friend whom you sincerely wish to support. That’s just a fact of life.
But, if after a few rounds of trying, things are still going nowhere, there’s no point in keeping them on. Simply end the relationship and move on, so that you may find another financial advisor that can better understand and meet your insurance needs.
In turn, your ex-financial advisor can spend their time on other clients instead, or look for some new ones.
This would be far better for both parties involved, because what’s the alternative? Ghost them until they get the hint? That hurts, you know.
If you’d rather manage your portfolio on your own and automate your investments, check out the best robo-advisors here.
Read these next:
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5 Best Wealth Management Services In Singapore (2021)
Money Confessions: Top 5 Personal Finance Goals SS Staffers Aim To Check Off In 2022
Why I Do A Yearly Financial Review (And So Should You!)
By Alevin Chan
An ex-Financial Planner with a curiosity about what makes people tick, Alevin’s mission is to help readers understand the psychology of money. He’s also on an ongoing quest to optimise happiness and enjoyment in his life.