Jay Rattien had a problem. He couldn’t get his financial adviser to pay attention to him or his portfolio. The adviser barely returned Rattien’s calls. Finally, Rattien called the adviser’s boss — the president of the company — and asked for a conversation.
The company president told him to meet him at his office. “First of all, he was 20 minutes late, and he told me to drive to his office. Incredible. So anyway I told him the situation,” said Rattien, an IT consultant in a New York suburb.
He outlined how much money he had, and how much he was about to have available to invest after the sale of his house in the Hamptons. “I told him, ‘At least once a year let me hear from you. That’s not much to ask,'” said Rattien.
Did he hear from the president, or from his financial adviser? Nope – not for an entire year.
“I finally called them up and told them I was taking my money,” said Rattien, who had employed the adviser for six years. “Then the president did call me back, and I let him have it. I told him all the things he did wrong.”
So five months ago, Rattien moved his money to a new adviser, J.J. Burns, president of J.J. Burns & Co. in Melville, N.Y. Rattien’s reaction now? “I’m so lucky to have met him.”
People leave their financial advisers for lots of reasons, experts say: when they move; when they no longer feel a connection to the adviser; when they go through a crisis; when they don’t want to pay the fees anymore; when they suspect they’ve been fleeced.
Or in Rattien’s case, when they’ve been repeatedly dissed.
“The reasons vary,” said Eleanor Blayney, a financial planner in Washington and the consumer advocate for the board of Certified Financial Planners. “Unfortunately abuse does happen, but there are other reasons. For example, we know that women often fire their advisers, after a husband dies. It’s probably because they haven’t been listened to (by the husband’s adviser). Or sometimes the children want mom to work with another adviser.”
Blayney said the 2008-2009 financial crisis also was a catalyst for breakups. “The financial crisis crystallized skepticism of financial advisers in the broad sense,” she said. “The Madoff scam and subsequent scams had many people questioning and coming to their advisers and saying, ‘How do I know you’re not that person?’ To a lot of people we were all in the same category at that time, and it really was an abuse of trust.”
Or it could be a simple reason: “The chemistry may not be there,” she said.
Burns has been on both sides of the breakup. “I want to know if it’s the right fit because I have a very specific client profile,” he said. Sometimes, if the fit isn’t right, Burns and a prospective client move on.
And sometimes, he takes on clients from other financial advisers. In addition to Rattien, Burns works with a 75-year-old trial attorney and his wife. They had spent more than 15 years at a large financial firm, in what Burns called a “culture of one size fits all.”
After analyzing their portfolio, Burns used dollar-cost averaging to put fixed sums of money over a seven-month period into diversified equity funds. He added commodities, such as gold, plus alternative investments, to hedge the portfolio. Many of these asset classes weren’t part of the clients’ previous portfolio.
Had they stayed with the old firm, Burns said, their previous adviser would have kept most of the money in stocks and some in a one-size–fits-all bond fund — because large firms generally don’t have multiple investment products available to them.
“I sometimes think the financial adviser doesn’t really give the client a value-add to the relationship,” Burns said. “Is it just money management and picking out mutual funds? I think that’s a mistake some financial advisers make.”
As a result, plenty of people break up with a less-than-stellar financial adviser.
So, once you’ve decided to pull the trigger, what next?
Lori Schock, director of the Securities and Exchange Commission’s Office of Investor Education and Advocacy, outlined these steps.
First, decide what you’re going to do with your money. Are you going to hire another adviser, or manage your own money? Either way, the receiving party (you or a new adviser) starts paper work that paves the way for the money to be placed in a new brokerage.
Do you need to tell the old adviser? “It all depends on how you like to break up with people,” Schock said.