Hi All! First, I want to thank you all for sharing advice; I’m so glad that there is a community dedicated to personal finance.
TLDR:
I (21m) have two accounts (Brokerage and Roth IRA) at Edward Jones. The fees (on the account as well as high expense ratio investments) are adding up, and I am ready to move and consolidate at Fidelity. My advisor has been friends with my grandparents and my parents (and did not do a great job advising at least my parents), but I don’t want to ruin any family connection because of this. Advice?
I started the account when I was 16 and because my parents were already customers they pushed me to open accounts at Edward Jones. Now, we live in a really small community (you know everyone knows everyone), so the financial advisor was a really close friend of my Grandparents. My parents also knew him very well, but IMO he did not steer them correctly because they are behind on preparing for retirement. He is very invested in my life, which is kind, and sets up meetings twice a year. However, I don’t feel like they add anything to my investing strategy.
While my account has performed well, it has consistently only performed at the market rate or slightly less. I have looked at the investments and many of them are American funds and all have extremely high expense ratios like 0.75 to 1.25 percent expense ratios. Additionally, I am stuck paying a money management fee that added up to over $400 this year (total value of the accounts is a little over 40K).
At the beginning of the year when I was considering this, I opened a brokerage account with Fidelity. I would like to transfer both accounts there. This would give me more (complete) control over my investments, and with relatively small accounts I can though everything into a few index funds and forget about it. Am I missing something here? How should I approach this with the financial advisor (my next meeting is due in January)? TIA!
How to Break Up with a Financial Advisor
byu/Ornery-Economist9950 inpersonalfinance
Posted by Ornery-Economist9950
23 Comments
It’s your money, do not worry about the advisor. Look out for number 1!
One option is to have your New advisor do the breaking up.
Just have the new advisor move all the money etc.
Might want to leave the family friend an email or voicemail saying “moving everything to be more consolidated, thanks” but this sort of thing happens every day.
Just move your accounts. Let him know the reasons. Be honest and upfront. He is making money from those fees you are paying. He is not really doing much for you to make those fees worth it. Look up the Warren Buffet bet https://www.investopedia.com/warren-buffett-usd1-million-bet-8779290
if moving your money out of the account counts as losing a family friend it turns out he never was a friend in the first place but actually an abusive scammer
just withdraw your money immedately and call it a day. i would recommend withdrawing first a majority of it and then transferring a smaller amount so that your a majority of money isn’t stuck until the transfer formally completes
“Thanks for all you’ve done, you got me started on my financial journey. I’ve got it from here, I’ll be transferring my assets to Fidelity now”.
They’re not your friend. This is not a personal relationship. Just business.
Just say your financial situation has changed and you need to have control over the funds and you are uncomfortable having to go through them for everything. They are aware if how much the cost of living has increased since Covid and say that not only can you not continue to contribute to the account but need to start withdrawing from it. I would say that you plan to contribute more to your 401k plan if you have one or establish a ROTH Ira if you qualify (most do) which they should have mentioned to you anyway. Te problem with small accounts is they are call potatoes to most advisors or anyone in the business and the returns reflect the effectively put into supposedly managing your acct. if they were good you wouldn’t want to switch. Just say you plan to spend some if it and the remainder contribute to one or multiple retirement plans and that Fidelity can answer any questions you have. Tell them $400 a year is a lot of money to you for the return you have been getting. I just hope they did not sell you loaded mutual funds which have added fees if you pull them out too soon. Maybe you can do a direct transfer if the funds but keep them with Fidelity instead. Please find out what types of mutual funds you have and I bet they are not no loss funds which have a management fee built in ;about 1%) so there is no cost to hit or sell. Also if you first sell them before transferring them you could be hit with capital gains taxes. Show fidelity your recent statement and they should be able to tell you the tax ramifications of how you do the transfer. You are smart for planning the change. In fact the majority of mutual funds underperform the market if you do the research.
I just birdied you have a Roth. Please ignore my comment about that. You might wish to look up the ratings of your mutual funds on http://www.Morningstar.com so u can discuss the ratings with your advisors.
$400 a year?
He will hardly care.
Send the transfer forms. He might not even call a $400 client. If he does, you dont have to answer. If you want to, tell him that you appreciate his help, but have decided to transfer to Fidelity because you like all their website features, then end the conversation. You really don’t owe him an explanation.
Fidelity will do all the legwork. Just get them the account numbers and they pull the funds over to your new like accounts.
EJ advisor will see the outgoing transfer. A quick email with simple explanation will suffice. At your age a FA is overkill.
Honestly FA probably took you on as a favor to the older generations. I doubt they will be phased by it. Just say you decided to DIY on another platform
Your advisor knows that he is making money from you. He may think that he is doing a good job, but if he was really good at investing he would have a lot more money after all these years and would not need to still be working.
You don’t have to explain anything. Just move the money. If you want to say anything, just say you are very interested in investing and want to learn more on your own.
A lot of people who don’t know what they are talking about will tell you that you are making a terrible mistake. That may be, if you go crazy and start trading the stock of the hour- buying and selling. Your note does not seem to reflect that type of person.
It is true that many people do lose money, but some don’t, and you just have to try to see how you do. You will lose money on some investments. Just learn from your mistakes and move on.
It is your money, don’t let sentiment keep you from switching. I fired my financial advisors – who were charging me 1.2% AUM – 3 years ago following the guidelines in Ramit Sethi’s book. I emailed them rather than calling, and when they wanted to talk to me about it, I politely declined.
IMO you don’t need an advisor at your age. Just use your employers 401k and open a Roth with Vanguard or Fidelity and contribute. This isn’t rocket science and an expensive FA at your age is a waste of money.
Just do it. It business. Your totally right. Don’t buy annuities unless you have read at least 3 books about them, by the way.
Of course he is invested in your life, that is how he gets you to stay with him. You can just remove your money and send him a note thanking him for his time, but say that your decision is final.
Hey! Since I’m kind of in the same boat (definitely having buyers remorse) I’m going to tag a question on here that maybe you, or others following, know the answer to. I have an FA who has me heavily invested in a few American funds as well, and as you point out the high expense ratio AND management fees really add up. I was seeking advice from a friend who is a retired FA (don’t worry, we trade goods and services-not asking for free advice 😉 and he said that FA’s should be paying a lower expense ratio so therefore their clients don’t pay the crazy high fees. Do you know if this is the case? This is a recent conversation and I have a year end meeting soon so I will definitely be asking, just thought I’d throw it out there for the sake of a conversation.
As with all things, the movie The Godfather Other provides guidance on this.
It’s not personal. It’s business
Two words: “ACAT transfer initiated by you on a self directed broker”
I broke up with my ed jones advisor. They will be friendly and nice to you. In case you potentially want to go back to them in the future. Plus they don’t want to hurt their reputation. I am super happy that I left. I am excited for you and wish you the best
Guess what? You aren’t going to hurt his feelings. People come and go all the time with an advisor. He isn’t going to dump your parents because you left. He’s still going to kiss their asses for those fees.
I found another financial advisor it was nice working with you????????????????
Let’s start like this… your FA is with Edward Jones. That’s like telling us you want to quit shopping at Walmart and try Nordstrom or Nieman Marcus. Congratulations, 🎊
Call Fidelity and have them initiate the transfer. Then email (or call) your advisor and thank them for all of their help over the years and tell them you are moving to Fidelity. If they make it awkward and try to engage you as to why, be straightforward and tell them you want more control over your accounts. That’s enough. Short and polite. You’re not the first or last person to move an account. Happens all the time. BTW, kudos to you for watching expense ratios and management fees. Those silently degrade your returns and can add up to big money over decades.