Thinking of Switching Financial Planners?

It can be a difficult, even emotional decision. Here are some things to consider before breaking up with your current adviser

By Chris Taylor

Paul Blow

You've got a dirty little secret. During long lunch breaks, or after work when everyone else heads home to their families, you're sneaking out to a secret rendezvous. You know what you're doing is perfectly justified, but you still feel a little bad afterwards. You never thought it would come to this. But here you are—cheating on your financial planner.

Thomas Keating knows that feeling. The 48-year-old lumber broker in Wareham, Mass.—which he lovingly calls the "armpit" of Cape Cod—had been with his previous adviser for about six years, faithfully following his buy-and-hold philosophy. But when his IRA started to "dive bomb" a couple of years ago and his adviser wanted to stay the course, Keating and his wife started soliciting a little advice on the side. "My adviser was a friend, a good guy, and those are awfully hard phone calls to make," says Keating, who has been slowly moving his business to Rajeev Kotyan at the Lexington (Mass.) office of NUA Advisors. "But we just had to stop the bleeding. It's almost like you're breaking up: 'You take the dog, I'll take the silverware.' " The new relationship is going well, and he's happy with changes they've made, such as adding a real estate investment to his self-directed IRA.

Keating is hardly alone. Shaken to the core by a market gone wild and scrutinizing performance and fees like they never had to do in a raging bull market, investors are more open than ever to getting a financial second opinion. A recent survey by consulting firm Oliver Wyman found that the number of affluent investors looking to switch advisers has tripled in one year. According to Spectrem Group, a scant 36% of millionaires think their advisers performed well during the market turmoil of the past year or so.

It's a recipe for relationship trouble. But switching advisers isn't as easy as, say, ditching your cell-phone provider. The ties are often decades in the making. "Money is such an emotional subject, and these planners have helped build their [clients'] retirement or children's college funds," says Szifra Birke, a consultant in Chelmsford, Mass., who helps financial advisers develop rapport with their clients. "So investors feel like they're betraying their planners and don't even have the courage or the words to have a conversation about it."

A DELICATE APPROACH

Getting a second opinion can cause gut- churning guilt. But just as a good doctor should respect your seeking a second opinion, so should planners. If they've put you in the right investments—appropriate for your risk tolerance and goals, with reasonable fees—then they have nothing to fear. (Except, of course, your understandable angst as one of the multitudes of investors traumatized by market turmoil.)

It's natural for an adviser to be taken aback, though, so bring up the subject with delicacy. Advises Birke: "An ideal conversation might sound something like, 'I'm really nervous, I don't seem to be able to relax, and all I can think to do is to get a second opinion. In a medical situation, even if I liked and trusted my doctor, I'd simply want to get more information. And this is as big to me as a medical situation.' "

But then you have to find the right second opinion and avoid sharks whose only goal is to steal your business rather than to give an unbiased review of your portfolio. If that's their objective, they're likely to point out a host of faults with your adviser that may or may not be there. They may also game their performance numbers by claiming what outstanding investments they would have put you into (with the benefit of 20/20 hindsight, of course).

"If you fire Fred and hire George, who's to say that George isn't even worse than Fred?" asks Jack Waymire, co-founder of the Paladin Registry, which matches investors with advisers in their communities. "They might just be trying to win your business, so there's a natural bias there. And if you ask for a sample portfolio, they're never going to show you a bad one. So you'll never really know what they've produced for an average client."

That said, there are some ways to protect yourself.

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