Should we stick with our financial/investment advisor or with the bank?
April 23, 2016 8:46 AM   Subscribe

We've been using the investment service our local bank provides, but advisors keep leaving and we have to explain again what we want. The latest was the best; he understood our needs and managed our money well. Now we've gotten a call from him saying he's left the bank and hopes to keep us as clients; we've also gotten a letter from the bank saying "[new guy] is replacing [old guy] as the Investment Advisor on your account(s)." We don't really want to change advisors again, but we also don't know what's involved in the decision; your thoughts are welcome.
posted by languagehat to Work & Money (13 answers total)
I would find an individual person (perhaps the current guy, perhaps someone entirely new) with whom you can build a long-term relationship and communication, rather than the bank's service which seems to be a revolving door. If you can get recommendations that is easier than starting from scratch; I asked our tax person (whom we trusted) for recommendations, and then I met with each of them and went with the one whose approach, fee structure, etc matched our needs. If the current guy is good and his fee structure is ok with you, I'd be inclined to stay with him, but there may be value in using this as a chance to meet with a number of people and do some comparing.
posted by Dip Flash at 9:00 AM on April 23, 2016

Odds are at the bank the services were free or close to it as part of your regular account costs. An independent financial advisor will either charge you for his services or sell you to his real clients which will be financial service providers.

The best financial manager is you in conjunction with an independent fee based financial advisor.
posted by srboisvert at 9:14 AM on April 23, 2016 [2 favorites]

Changing advisors may involve some challenges. It might be as simple as going to your new guy and signing to open new accounts and transfer.

Depending on what investments you have, investments can be transferred as-is, or have to be cashed in and new ones purchased. Watch for the tax consequences of this (i.e. selling is unlikely to benefit you.) Also, the way your new guy is being paid may be different. Commissions, fees, etc may apply. So understand how your guy is getting paid with the new firm.
posted by thenormshow at 9:40 AM on April 23, 2016 [1 favorite]

The bank wasn't working very well, so don't stay there. Whether you want to follow the last guy depends on how much you trust him and his advice, and what kind of situation he is going to. I would ask him straight up about fees, insurance on your assets, etc. Business is business.

If he is going to be a financapial planner/advisor not affiliated with a bank or broker, then figure out who is going to hold the securities. Could still be the same Bank, could be a brokerage. In either case, that institution will bug you for the chance to be your advisor. You can say no, but they may have or feel a responsibility to know what your investment goals are and that the investments are in line with those goals.

There are new rules coming down for investment advisors that will change habits and fee structures so be prepared for explanations and possibly confusion.
posted by SemiSalt at 10:07 AM on April 23, 2016

> I would ask him straight up about fees

I did; he said nothing would change from our point of view: "Before, your fees were going to the bank and then to me, now they'd go straight to me." Is that plausible?
posted by languagehat at 10:25 AM on April 23, 2016

I did; he said nothing would change from our point of view: "Before, your fees were going to the bank and then to me, now they'd go straight to me." Is that plausible?

It's plausible without being helpful. I would ask him for a written explanation/breakout of his fee structure so that you understand what and how much you would be paying with him. And with that, you would have an easy way to compare with anyone else you decided to meet with, as well as with the bank's fee structure (which should be available upon request as well).

If he can't or won't provide a clear fee structure, I'd run because you would have no way to know what the costs are or when they might need to be paid.
posted by Dip Flash at 10:43 AM on April 23, 2016 [3 favorites]

To me, the broker or adviser is more important than the institution. The instittution, or bank in this case, is simply a conduit for clearing your trades and housing your money and investment assets. Assuming the broker's new institution is SIPC insured and the fees are comparable or better, I would move.

I would also do a FINRA lookup of both your broker and the firm. This will give you any regulatory history, as well as your broker's background and what he has been doing for the last 10 years. Might as well do it for the new person at the bank too to see what she is all about.
posted by AugustWest at 10:56 AM on April 23, 2016 [3 favorites]

"Before, your fees were going to the bank and then to me, now they'd go straight to me." Is that plausible?

Yes, assuming it's accurate and true. Having a financial person you like is really important so I'd do what people above are suggesting, ask him for his specific fee structure, compare it with a few people you've looked up on FINRA and make your choice. Make sure you're clear what ALL the costs are associated with changing (i.e. do you have to cash anything out, was the bank waiving certain fees that this guy needs to pay etc etc)

There's very little benefit to having "the bank's guy" (as a generic placeholder for whoever they have here, you are a linguist you understand) as opposed to the guy you actually like. But, having someone who is familiar with the way your bank does things may also be useful. Just make sure he's insured in whatever way he is supposed to be. I have a guy, for example, who works for his own company but we "allow" him to manage the money that Fidelity holds for us (sister and I) instead of having someone at Fidelity do it. Seems like a roundabout way to do it, but it totally works for us.
posted by jessamyn at 11:16 AM on April 23, 2016 [1 favorite]

Another question worth asking is if he is willing to be a fiduciary on your account. You may have seen some of the recent news around the new requirements being phased in for some Investment Advisors. (I, personally, will not work with an Investment Advisor who isn't a fiduciary, but that's your call. Here'a a good and simple explainer. )
posted by minervous at 11:40 AM on April 23, 2016 [2 favorites]

I switched to a new bank when my FA moved to it.
posted by brujita at 12:36 PM on April 23, 2016

Before, your fees were going to the bank and then to me, now they'd go straight to me." Is that plausible?

This is absolutely useless information. He hasn't told you exactly how much the fees are or how they are calculated, which is just the way he likes it.

In general, it is best to avoid any financial advisor attached to a bank or brokerage. Instead of charging you by the hour for their their advice, they charge a percentage of your assets under management. On top of that, rather than directing you to investments that make you the most money, they direct you to investments associated with the bank or brokerage that make the advisor the most money through hidden fees. This makes it very difficult to determine exactly how much the advisor is costing you.

Instead I would recommend finding an independent fixed fee-only advisor that you pay by the hour or annually.
posted by JackFlash at 10:28 AM on April 24, 2016 [2 favorites]

I asked about the fiduciary thing and he responded: "We also have a fiduciary responsibility to you as an Investment Advisor Representative, which means we are working in your best interest and and doing so in a prudent way." Is that a satisfactory answer?
posted by languagehat at 2:56 PM on April 30, 2016

We met with him and he provided responsive and helpful answers to all our questions (including some suggested by this thread); we signed the papers to stay with him and feel comfortable about having done so. Thanks to all who answered; I've marked as "best" the responses that led in the direction we wound up going.
posted by languagehat at 11:04 AM on May 5, 2016 [1 favorite]

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