Date: April 15, 2024

The Price of Loyalty: When to Rethink Your Financial Advisor

Loyalty is a valued trait in many aspects of life, but an unquestioned allegiance to particular financial advisors may be a costly mistake. Why? 

This advisor will influence or control your financial decisions that can impact when and how you live during retirement. It is important to make the right decisions. It can also be very costly if you select the wrong financial advisor.

Consider this: The most expensive commodity on earth is bad financial advice.

We meet with people all the time who tell us while they like their current financial advisors, they have no idea if they are receiving competitive returns on their investments. They may not even know how their advisors are compensated or by whom. They only know what their financial advisors have told them, with no documentation for key facts. 

As your life evolves, so should the quality of your advisor’s financial advice. It is typical that the more money you accumulate, the more complex your financial affairs become. That’s why an important criterion for an advisor is their ability to provide increasingly sophisticated advice and services.

In today’s blog, we’ll explore the hidden costs of staying with the wrong financial advisor and highlight some red flags that it might be time for you to consider changing your financial advisor. We suggest transitioning from your current advisor to a new fee-only fiduciary financial advisor. 

The Consequences of Sticking with the Wrong Advisor

Case study: Bob owned a successful engineering firm, which he sold for $7 million. His current financial advisor received most of those assets, where he invested primarily in mutual funds with trailing compensation and insurance-based products (annuities, life insurance, Long Term Care) that paid the advisor hefty commissions. The advisor provided limited financial advice to Bob but reaped the benefits of the one-time and ongoing trailing fees/commissions. 

Commissions are paid by brokers/dealers, mutual fund companies, and insurance companies. The commissions are compensation for selling the third parties’ products.

Heritage Insights: Make sure you understand who is paying the financial advisor and how much. Are the commissions being deducted from your assets? Is there any documentation for the advisor’s compensation, or is it strictly verbal?

  • If an advisor is fee-only, their only compensation method is a fee. Fees can be asset-based, subscriptions, fixed fees, or hourly. This fee is paid by the client and not a third party.
  • If the advisor is fee-based, this is a hybrid compensation arrangement, which means the financial advisor can be compensated with fees and commissions.
  • If the advisor is only compensated with commissions, then this person is paid by one of the product companies (broker/dealer, mutual fund family, insurance company).


Watch Paul Schatz, our founder, discuss inflation vs. high prices. 


Missed Opportunities: How the Wrong Advisor Can Damage Results

Case Study: Barbara is a widow who has followed the advice of the financial advisor her husband used for more than ten years. Her husband handled most of their financial affairs until his unexpected passing. Rather than rock the boat, Barbara continued using the same advisor because he knew the family.

Barbara was aware that her husband had invested in several technology companies. With persistent inflation taking a toll on her retirement accounts, Barbara attempted to communicate with the advisor several times about his strategy for her assets.

The advisor was very slow to respond, and when he did finally contact her, he offered excuses and kept referring to her deceased husband. Barbara is a very sharp lady and wanted to know how the advisor would protect her assets and financial security.

Heritage Insights: As fee-only fiduciary advisors in New Haven, CT, we help investors build and manage defensive retirement plans nationwide. A financial advisor with the right background may need to gain the necessary knowledge to provide advice based on the rapidly changing market conditions. 

Signs You’re With the Wrong Financial Advisor

There are five important signs it’s time to consider changing financial advisors:

1. Your advisor doesn’t promptly return calls or emails or explain your investment options, making you uncomfortable by asking them questions.

Trust and comfort in your advisory relationship are crucial. If your advisor’s recommendations consistently cause stress or your concerns are not being addressed, then it may be time to reassess the relationship.

2. If your portfolio isn’t performing well, and your advisor can’t adequately explain why or lacks a strategy for improving results, it may be time to rethink the relationship.

3. You believe the amount of money being deducted from your accounts is excessive. In particular, when you compare it to the advisor’s results and communications.

Ensure the advisor provides a written document explaining how and who compensates them.

4. If your advisor isn’t considering your financial goals and risk tolerance, it may be time to reassess your relationship with the financial advisor.

You should work with an advisor to craft a fully customized financial and retirement plan for your specific needs, concerns, and goals. Don’t settle for a cookie-cutter, one-size-fits-all solution.

 5. You may need a financial advisor with specialized retirement planning, tax, and estate planning knowledge. For example, you want a plan that provides a legacy for children and grandchildren. Consider making legacy planning part of your long-term strategy.

Making the Transition

Review any contractual obligations with your current advisor to understand the terms of disengagement. It’s also courteous to inform them of your decision and discuss the transition process so you minimize any financial consequences.

Tips for a Seamless Switch

Gather all necessary financial documents and clearly understand your new financial advisor’s onboarding process. Open communication between your old and new advisors can facilitate a smoother transition.

Get to Know Heritage Capital

Not all financial advisors operate on the same principles. Many prioritize their interests over those of their clients. 

Heritage Capital stands apart from other wealth management firms. Our foremost goal is to help our clients plan their futures while building and preserving their wealth. We employ a unique Active Management approach to maximize investment gains while reducing their risk during market downturns.

Our firm is completely independent, eliminating the usual conflicts of interest that are prevalent for Wall Street firms. We operate on a fee-only basis, meaning we don’t earn commissions, so there’s no incentive to sell you investment or insurance products. Our recommendations are driven solely by the best interests of our clients. 

Ready to learn more? Connect with us.

plan a bulletproof retirement


Paul Schatz, President, Heritage Capital