‘I’m worried about hurt feelings’: I regret hiring my brother-in-law as my financial adviser. How do I fire him?

“My brother-in-law has not charged me any money to handle my account.” (Photo subject is a model.) - Getty Images/iStockphoto

Dear Quentin,

When I divorced, my brother-in-law, a financial planner, helped me invest my money. I now realize that I don’t really like dealing with him personally and I would like a different company to handle my accounts. My brother-in-law has not charged me any money to handle my accounts, but I also do not think that I am his top client.

I have found someone who I feel more comfortable with. I would like to move everything over to that person‘s company. I do not know how to tell my brother-in-law that I am switching. I’m worried about hurt feelings, etc. (I should add that the person that I may switch to is a friend’s son, if that matters or not ).

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My brother-in-law has no idea. He is technically past retirement age, but still working; my friend’s son is in his late 20s. What should I say?

Looking for Fresh Pastures

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Dear Fresh,

Rest assured, your brother-in-law did not offer his services for free.

Nothing is for free in this world. Don’t worry too much about your brother-in-law’s feelings. He has earned enough money from your business to more than make up for the disappointing news that you are moving on — and he will have a choice to either take it personally, or realize he had a good run but nothing lasts forever. He will either accept your decision gracefully, or accept it professionally and make one last bid to keep you. If you are sure, stick to your guns. It might sting, but he’ll get over it.

This is not another divorce where you have to negotiate. Tell your adviser the truth. You want to take your retirement planning in a new direction and allow your friend’s son, who is starting out in his career, to manage your assets. What do you say? Start with two magic words: “Thank you.” Tell him you wish to thank him for his help and advice, and you feel the time is right to try a new adviser. If he asks you why, you can tell him that it’s not him, it’s you — you want to shake things up.

You don’t owe him an explanation. But if you choose to give him more detailed reasons, you could say, for example, “I need an adviser who will work closely with me and communicate with me on a regular basis.” Or, “I would like to try a new company to see what we can learn from each other.” You could even say, “I have a particularly good rapport with this new adviser, and it will help us both to work together.” You’re not telling your brother-in-law that he’s good, bad or ugly. Instead, you are focusing on your needs.

Story Continues

Financial advisers operate on a fee-based or fee-only basis. They either charge you for your services, or they earn commissions from the investment products they sell you and/or charge you a fee on top of that. Your brother-in-law, from what I can gather from your letter, did not charge you a fee — but he earned commissions from investing your money. That can also influence the adviser’s choices; opting for a fee-only adviser who does not earn commissions can help preserve their independence.

The logistics of moving adviser

It’s easier if they’re not a friend, but don’t bring emotion to the table when changing financial advisers. James M. Dahle, founder of the White Coat Investor, has written about how to fire an adviser. “I have no qualms in recommending that you fire an adviser that gives bad advice,” he says. “If your adviser recommends market timing, sector rotation, frequent churning of investments, mixing insurance and investing, high-expense-ratio mutual funds, loaded mutual funds or individual stock investments, then they need to be fired.

“If your advisor has the right to place trades in your account, you’ll also need to rescind that authority with a written notice,” Dahle adds. “Many brokers, mutual-fund salespeople and insurance agents masquerading as advisers will go into full-on sales mode to keep your business, hounding you to no end. A simple, ‘No thank you, I’ve made up my mind’ is all you need to say on the phone. It can be a little harder if you’re firing a friend or relative (all the more reason not to use one).”

Check the terms of your contract. “You’ll likely be paying some money to transfer your account away, perhaps a few hundred dollars per account,” Dahle says. “You may also have to pay commissions to liquidate some of your stocks and mutual funds in retirement accounts. In a taxable account, if commissions are high at your old brokerage, transferring them in kind to your new brokerage prior to selling can save you a lot of money. You may also owe some advisory fees, depending on your contract.”

Not all advisers are fiduciaries

Advisers are a varied bunch: They may invest your money in ETFs and/or mutual funds, actively manage your finances, and/or give you overall advice and not even touch your money. Not all money managers are fiduciaries, who are professionals that have to act in their client’s best interest under the Investment Advisers Act of 1940. Find out whether your friend’s son is a fiduciary — rather than, say, a broker-dealer — and whether he’s a member of the Financial Industry Regulatory Authority (Finra).

Reasons for firing your adviser include cost (16.3%), the adviser’s retirement (13.5%), poor communication (12.1%), failure to listen (10%), disappointing performance (10%), different values (6%), ineffective advice (5.7%) and bad rapport (2.8%), according to this survey by Financial Advisor Magazine. Nearly a quarter of those polled gave other reasons, which just goes to show that your relationship with your adviser can be as fraught and complicated as every other relationship in your life.

Merrill Lynch has five questions to ask your adviser: “1) What’s the outlook for inflation and interest rates in 2025 — are there any moves I should consider now? 2) Have there been any rule changes that could help me save more for retirement in 2025? 3) Does my current allocation to equities make sense in today’s markets? 4) I’ve heard that big changes could be coming for gift- and estate-tax rules. What can I do to prepare? 5) Are there other tax changes coming that I should plan for now?”

It’s not a one-and-done conversation and, like any personal or professional relationship, you may find that while your friend’s son does not share some of your brother-in-law’s weaknesses, he may come with his own challenges. It may be that you decide to go with a third choice — someone who is not connected with your personal life, now or in the future. Mixing business with family members, friends and, in this case, the son of a friend can make it harder to address problems if and when they arise.

No husband or wife is perfect. And the same is true for financial advisers.

Related:I begged my adviser to sell amid the market turmoil. He dragged his feet and I lost $20,000. Do I have any recourse?

Previous columns by Quentin Fottrell:

We’re in our 70s. How do we withdraw $6 million from our retirement fund without getting killed on taxes?

My children will get my estate — not my husband, who has $1.3 million. Is that fair?

I’m 42, a single parent with $372K in cash and CDs. I won’t invest in stocks. Am I wrong?

‘My monthly expenses are $6,500’: I’m 64, have $1.2 million in a 401(k) and two mortgages. Can I afford to retire?

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