Splitting up with their financial advisor every few years can be good for investors, according to a retirement expert.
Even if a client has no major qualms with the service, it’s still smart to shop around once in a while, David Blanchett, head of retirement research for Morningstar Investment Management, writes in the Wall Street Journal. That’s because the industry has gone through “tremendous change” during the past 10 years, so what could have been a good fit a decade ago may no longer be the case, according to Blanchett.
Other advisors may be offering better service or lower fees, he writes. On the other hand, doing some comparison shopping can also lead the investor to reaffirm their desire to continue working with the same advisor, according to Blanchett.
Blanchett suggests that investors reassess their own personal situation and assess their advisor’s worth to them based on their current and future needs rather than past needs.
Major changes that could prompt such soul-searching could include getting married, divorced or having the children move out of the house, he writes. Having children, or children going to college, are other reasons to look around, as are getting a new job, a raise or a pay cut, according to Blanchett.
Investors should then reassess their investing comfort — those who feel more confident about managing their portfolios or opting for a prepackaged one could save on fees by working with planners charging hourly fees rather than asset-based fees, for example, he writes. Other investors may be comfortable using a robo-advisor, for which there is a growing array of options, according to Blanchett. Conversely, some investors may need more rather than less personal attention, he writes.
Investors should also take a close look at their fees — while the typical asset-based fee of around 1% hasn’t changed significantly, other fees, such as those for mutual funds and exchange traded fund expense ratios, have been falling, according to Blanchett.
Finally, investors should consider an advisor’s qualifications, and here Blanchett suggests that investors opt for certified financial planners.
“And if your current adviser isn’t a fiduciary, it might be time to reevaluate,” he writes.
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