Begin with the end in mind

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Begin with the end in mind: Start your next advisory relationship with a clear exit strategy... 
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​By Ashley Bernard

A recent Google search of “questions to ask your next financial advisor” yielded approximately 16 million results in slightly less than 60 seconds. The dilemma with this astounding number of results is not a single one suggests beginning your next advisor/client relationship with the end in sight; a clear exit strategy in the event the new relationship goes awry.
 
In many of life’s arenas such an approach would be discouraged. Most American’s are taught early on that skepticism is negative and will lead others to view you as pessimistic, a glass half-empty kind of person, or even worse a ‘Negative Nancy.’  None of us want that!
 
Unfortunately, a number of advisors, broker-dealers, major wire houses, and various salespeople are aware of this. In fact, they bank on the fact we, as individuals, are generally inherently trust worthy and not naturally inclined to begin with the end of the relationship in mind. Consider being more assertive. Ask for the terms and costs of ending the relationship if you are not satisfied. Doing so could save you 100’s of 1,000’s of dollars.   
 
For example, if you invested $250,000 with a financial advisor as follows:
 
$100,000              Tax-Deferred Annuity
$100,000              Permanent Life Insurance (Whole, Variable, Universal)
$ 50,000                Individual Investment Account (Stocks, Bonds, Mutual Funds)
 
Exiting the annuity and the permanent life insurance, unbeknownst to you, could cost you upwards of 10% ($20,000) depending on the particular product and the length of time you’ve owned it. The individual investment account, while certainly more modest, is likely to ring in somewhere between $50 to $175 fee (78% of the time).  This assumes that none of the investments in the individual investment account are loaded funds; those could cost you another 5% or $2,500 if sold too soon!  Thus bringing your total cost to leave, in a worst case scenario, up around 8% or 9%...YIKES!
 
Isn’t that something most, if not all, of us would like to know and understand more clearly before entering into our next advisor/client relationship? If you’ve found yourself nodding your head yes, I recommend adding this question to your list of questions you’ll ask your next potential financial advisor
 
“IF I DECIDED TO END MY RELATIONSHIP WITH YOU IN SIX, 12, OR 24 MONTHS WHAT WOULD THAT LOOK LIKE AND WHAT WOULD BE MY ASSOCIATED COSTS (i.e.; transfer fees, sales commissions, surrender charges, etc.)?”  
 
Doing so could save you substantially, not to mention, provide you with some or all of these additional benefits:
 

• Position you to make more informed decisions
• Hold your future advisors to a higher level of accountability
• Reduce your fears of reaching out and communicating with your future advisor on a more routine basis
• Establish a healthy status quo between yourself and your future advisor   
• You will never feel stuck in a relationship you no longer want to be a part of again!

 
So, remember, you should NEVER fear asking your advisor questions and you should NEVER allow your advisor to make you feel guilty for doing so! If either of these conditions is present, it likely isn’t a good fit.
 
Sincerely, 
Those of us watching out for you

Resources:
http://www.nasaa.org/wp-content/uploads/2014/04/NASAA-Fee-Survey-4-24-14.pdf
http://www.investopedia.com/articles/financial-advisor/012117/smart-way-switch-financial-advisors.asp