Three reasons to end your financial advisor relationship and how to go about it.

• The reasons why individuals fire their financial advisors are primarily due to the quality of the advice and services provided, the quality of the relationship, and the perceived value of working with that advisor in relation to the cost.
• Numerous individuals engage the services of a financial advisor in order to have an expert on their team.
• Most individuals continue to follow their advisors' recommendations rather than terminating their relationship.

While poor performance may cause some individuals to end their relationship with a financial advisor, it is not solely based on the returns generated from their investments. Experts suggest that trust plays a crucial role in the evaluation of an advisor's performance.

"According to certified financial planner Tim Maurer, chief advisory officer at SignatureFD and a CNBC Financial Advisor Council member, the primary reason individuals choose an advisor is due to their liking and feeling of being liked by them. This preference goes beyond mere liking and is indicative of a deeper level of trust."

If trust is compromised or at risk in financial relationships, as in romantic ones, individuals often contemplate separation. If you are uncertain whether it is time to part ways with your financial advisor, here are three factors you may want to take into account.

Quality financial advice

According to a 2023 analysis by Morningstar, individuals who have terminated their financial advisors cited reasons such as feeling uncomfortable with the level of risk, not receiving sufficient direction, or believing the advisor was using cookie-cutter solutions.

The research indicates that the top reasons individuals dismiss their financial advisor are the quality of the advice and services offered, the quality of the relationship, and the perceived value of working with that advisor in relation to the cost.

Samantha Lamas, a senior behavioral researcher at Morningstar and co-author of the report, stated that their critique is focused on the services provided by the advisor rather than the performance of their investments or the cost of their services.

Quality of the relationship

Danielle Labotka, a Morningstar behavioral scientist and co-author of the report, stated that many people hire a financial advisor because they desire an expert to provide them with personalized financial advice.

Financial advisors can comprehend the aspirations, requirements, and preferences of typical investors and offer them sound financial advice, according to Labotka. They can also create a comprehensive financial plan that aligns with their clients' long-term objectives.

Before deciding to end your relationship with your advisor, Maurer advised considering several questions about your relationship with them.

Maurer asked, "Do you believe that they comprehend your needs and priorities, or are they merely promoting their own views on financial markets and products they sell?"

When deciding whether to remain with your current advisor or seek a new one, consider if they act as a "fiduciary," meaning they must prioritize their client's best interests. Financial planners and registered investment advisors are legally obligated to be fiduciaries.

Cost of services

A financial advisor is a broad term that encompasses a range of financial experts providing diverse services at varying rates, including an hourly fee, a flat project fee, or a percentage-based management charge. Some financial professionals derive their income from the sale of products, which they are commissioned to do.

Often, clients leave their advisor not because of the actual fee, but because of the perceived value for that cost, according to the Morningstar report.

Despite knowing the cost, people may still feel that they are not getting their money's worth, as Labotka stated.

James Lee, founder of Lee Investment Management in Saratoga Springs, New York, emphasized the importance of both the client and advisor understanding the scope of services provided and the compensation the advisor will receive throughout the engagement. This, he said, is crucial for the client to comprehend the value of the financial services they are receiving from their advisor.

How to manage an advisor breakup

Most individuals continue to follow their advisors' recommendations rather than terminating their relationship.

""Making a decision to make this change requires a significant amount of effort," Maurer stated."

Disengaging with a financial advisor may indicate the need for a change, and it is crucial to contact the advisor or firm to learn the procedure for severing ties.

"Notification periods and early termination fees may be part of the process, as well as fees for transferring accounts, so it's crucial to understand these fees, said Lee, a past president of the Financial Planning Association."

Notify your advisor that you are leaving, as recommended by Lee and Maurer.

Thank you for your years of service. I am moving my accounts elsewhere and would like to know what fees may be charged for moving my investments.

It may be beneficial to sever ties with an advisor as a "professional courtesy" to help the advisor and the industry improve, Lee stated.

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