Breaking up is hard. You were once so close, but now the distance seems insurmountable and it’s time to say goodbye. You’ve moved on – you just need to make it official.
A painful breakup process isn’t reserved for relationships. Ending a professional relationship can also hurt. Your financial advisor is no exception because you can’t just get up and leave, especially if they are handling your investments.
When breaking up with a financial advisor, you may have to pay service fees, fill out paperwork, and of course, you’ll need to decide where you’re taking your money. We’ll walk you through the process of leaving your financial advisor so you can do what’s best for you and your money.
Why Use a Financial Advisor?
A financial advisor is a professional who provides financial advice to clients for a fee. They often sell investments and are compensated by charging fees on those investments. A good financial advisor will do more than just provide investment advice – they’ll also help you set long-term financial goals (like buying a house or saving for an RRSP or RESP) and chart your course to accomplish them.
If you’re unsure about managing your money, a financial advisor can educate you on a variety of financial topics beyond investment advice. Many Canadians appreciate having a financial advisor as a knowledgeable professional to help them manage all aspects of their money, especially when they are just starting out.
Why Leave a Financial Advisor?
A financial advisor is an investment professional who charges fees on your investments, but you never have to pay out of pocket. That may sound like a great deal but working with a financial advisor does have some drawbacks – and those drawbacks can make working with a professional more trouble than it’s worth. Here are some of the top reasons that Canadians leave their financial advisors:
If your financial advisor is hard to get a hold of, it might be time to take your investments elsewhere. After all, your investments are your future nest egg, and there should have an open line of communication between you and the person managing them.
Not Valuing Your Opinion
Your financial advisor is an expert, but they shouldn’t ignore your opinions and ideas. If your financial advisor won’t take your input into consideration, or at least explain why they aren’t using your approach, it may be time to move on.
Financial Situation Changes
When you have a major life event like marriage, the birth of a child, or retirement, you should re-evaluate your financial plan to ensure you are on the right track with your money. If your financial advisor isn’t willing to change their financial advice even when your situation changes, it may be time to leave.
Going It Alone
Finally, when you are new to managing your money, the experience of a financial advisor is valuable, but as you gain knowledge and skill, you may find you’ve outgrown your financial advisor’s services. If you’re ready to go it alone with your money, it may be time to move on.
How to Leave Your Financial Advisor
The process of leaving your financial advisor will vary depending on the firm. Most of the time you can start the process of leaving your financial advisor either in-person or over the phone, followed up by an email or in-person meeting to sign paperwork. Some may require you to submit your request in writing, and others may charge a termination fee or service fee.
Before you break the news to your financial advisor, review your contract. The termination process and associated fees are most likely outlined in the original contract, and you might be able to avoid some fees by cancelling on the anniversary of your sign-up date instead of mid-year. Your contract should also outline the transfer out fees you may have to pay if you move your investments to another institution.
You should also decide where you are taking your money before you leave your financial advisor. Making this decision beforehand will not only make the conversation easier, but it will also make the transfer process simpler since your financial advisor will most likely be able to transfer your investments directly to their destination with no downtime.
Where to Go Once You Leave Your Financial Advisor
Once you’ve decided that you are ready to leave your financial advisor, you need to choose where to take your money. You have three options:
Another Financial Advisor
While your current financial advisor may not be the right fit for your financial situation, another financial advisor may be. When interviewing new financial advisors, make sure to have an in-depth discussion with them about your expectations of their performance and communication. If you aren’t ready to manage your money yourself, a financial advisor can still be a good choice.
Robo advisors are a happy medium between a high-cost, full-service financial advisor, and a completely DIY approach. There are many trustworthy robo advisors in Canada that will provide you with a preset investment portfolio based on your financial needs. Some robo advisors, like Wealthsimple, even offer additional financial planning services if you require it and will pay your transfer fees if you are moving your money from a financial advisor. You’ll pay lower fees with a robo advisor, but you won’t get the same level of customer service that you would with a financial advisor. Most of your investing will be administered automatically online. Now is a great time to sign up because Wealthsimple is offering Young and Thrifty readers an exclusive deal: get a 25 cash bonus open and fund your first Wealthsimple Invest account (min. $500 initial deposit). For all the info, read Young and Thrifty’s Complete Guide to Canada’s Robo Advisors.
If you’re ready to manage your money yourself, you can break up with your financial advisor and move your money to an online discount brokerage. Online brokerages like Questrade (our top pick) charge almost no fees but also don’t offer any financial advice. You can build your portfolio as you see fit and use an active or passive investing strategy. With self-direct investing, you are in the driver’s seat and fully in control of your money. If you want more information, read Young and Thrifty’s Ultimate Guide to Canada’s Discount Brokerages.
The Bottom Line
Financial advisors can be a useful resource for anyone new to managing their money. But when it’s time to break up with your advisor, it’s best to move quickly and not look back. Whether you’re switching to another advisor, one of the top Canadian robo advisors, or an online discount brokerage, make sure to be direct with your advisor, and remember that you don’t owe them anything. Breakups are unpleasant, but it’s a little short-term pain for a lot of long-term gains.