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    How to Break Up with Your Financial Advisor (and What to Do Next)

    enJune 05, 2024

    Podcast Summary

    • Financial Advisor DissatisfactionPoor communication, lack of transparency, and advisor's incentives to sell certain products are common reasons for leaving a financial advisor. If these issues persist, consider managing your finances independently or seeking a new advisor.

      Breaking up with a financial advisor can be a necessary step for those experiencing poor communication, lack of transparency, or receiving financial advice that doesn't align with their goals. According to a 2015 poll, these are some of the most common reasons people choose to leave their financial advisors. Communication and transparency are crucial elements in a successful advisor-client relationship. When these aspects are lacking, it can lead to feelings of being overlooked or misunderstood. Moreover, financial advisors may be incentivized to sell certain products, which might not align with your financial goals. In such cases, it's essential to understand your financial situation and consider managing your finances independently. If you're considering a breakup with your financial advisor, assess the reasons for your dissatisfaction and determine if it's time to seek out a new advisor or manage your finances yourself. Remember, it's your money, and you deserve to feel seen and heard in your financial journey.

    • Financial goals and advisorsUnderstand financial goals and capabilities before working with a financial advisor. Tailor investments to different types of accounts to optimize growth and income.

      It's essential for individuals to understand their financial goals and capabilities before deciding whether to work with a financial advisor. Some people may not need an advisor, particularly those with less than $1,000,000 in taxable brokerage accounts. However, those who choose to work with an advisor should ensure their investments are tailored to different types of accounts, such as taxable brokerage accounts, rollover IRAs, and Roth IRAs. Mismatched investments in these accounts can be a red flag, as taxable accounts should generally focus on growth rather than income, while tax-sheltered accounts should prioritize income and growth. By being aware of these distinctions, individuals can make informed decisions about their financial management and potential partnerships with advisors.

    • Tax implications of investment accountsMaximize tax benefits by understanding different investment account types and optimizing accordingly. For example, Roth IRAs offer tax-free growth, while taxable accounts can benefit from high growth stocks without dividends. Avoid identical investments across all accounts and ensure asset managers add value.

      When managing different investment accounts, it's essential to understand the tax implications and optimize each account accordingly. For instance, a Roth IRA is ideal for tax-free growth, while a taxable account can benefit from high growth stocks that don't pay dividends. However, it's crucial to avoid identical investments across all accounts and ensure that asset managers are providing value. During the account transfer process, remember that you don't need the departing manager's approval to move your funds, and maintaining open communication is appreciated but not necessary. Lastly, using a single platform like NetSuite can help reduce costs and simplify financial management for businesses.

    • NetSuite financing, managing assetsNetSuite offers a flexible financing program for businesses, enabling them to streamline processes and improve efficiency. Managing assets independently can be a cost-effective option for small clients, but clear communication with advisors is crucial.

      Streamlining business processes and improving efficiency can be achieved by utilizing a single platform like NetSuite. This platform offers a flexible financing program, allowing businesses to skip payments for up to six months. NetSuite is trusted by over 37,000 companies, and you can learn more about it at netsuite.com/richgirl. Another key takeaway is that managing your assets yourself can be a viable option, even if you have been working with an advisor. Small clients may not be worth significant time or resources for asset managers, and their performance should not be the sole factor in your decision to manage your money independently. If you decide to take this step, it's important to communicate clearly and respectfully with your advisor. A script provided by Stash Wealth can serve as a starting point for this conversation. Remember, you are paying for a service, and it's essential to approach this transition professionally.

    • Advisor to robo-advisor transferWhen transferring investment accounts from an advisor to a robo-advisor, parallel your account types, be aware of transfer fees, and assess your portfolio after completion

      If you're considering moving your investment accounts from an advisor to a robo-advisor like Betterment for self-management with some assistance, ensure you parallel your existing account types. Opening all three accounts (Roth, pretax, and taxable) with Betterment isn't mandatory, but it simplifies management. Before initiating the transfer, notify your old advisor and inquire about any transfer fees, such as termination fees or ACATS fees. Be prepared to pay some fees during the process. If you have multiple accounts of the same type with your current advisor, consider consolidating and combining funds by tax status. The transfer process might involve selling assets before moving them, leading to capital gains and tax implications. Keep any documentation generated during the process for future use. Once the assets are under your control, assess your portfolio and make necessary adjustments based on your age, risk tolerance, and timeline. Remember, the goal is to take control of your financial future with confidence.

    • Hidden fees and inappropriate insurance productsBe aware of hidden fees and inappropriate insurance products in your investment portfolio, focus on asset allocation, diversification, tax efficiency, and keep track of fees for low-cost options

      It's essential to be aware of potential hidden fees and inappropriate insurance products in your investment portfolio. These can often drain your resources without providing significant value. Instead, focus on understanding your asset allocation, diversification, and tax efficiency. Asset allocation refers to the percentage of stocks, bonds, and cash in your portfolio, with a heavier equity allocation for younger investors and a heavier bond allocation for those closer to retirement. Asset location, on the other hand, involves considering where you hold your assets based on tax implications. Lastly, keep track of your fees, aiming for low-cost index funds or ETFs, and consider engaging financial professionals for specific projects or advice instead of ongoing management.

    • Financial foundationCalculate monthly income, save tax-efficiently, plan for short, medium, and long-term savings, and automate contributions to achieve 80% of financial goals

      Building a solid financial foundation involves making a few key decisions and setting up automatic contributions. First, calculate your monthly income after taxes and save and invest in a tax-efficient manner. Next, create a plan for short, medium, and long-term savings, and automate your contributions to those accounts. By simplifying these steps and automating your savings and debt payments, you can achieve 80% of your financial goals with minimal effort. Remember, this is just an overview, and there's much more to learn on the topic. But by focusing on these steps, you'll be well on your way to financial success. As always, automating your savings and investments can help eliminate budgeting guesswork and reduce financial stress. Stay tuned for more financial insights in two weeks on "Money with Katie." This show is produced by Morning Brew and is brought to you by Katie Adi Tassan, Henna Velez, Nick Torres, Devin Emery, and Kate Brandt.

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