For many people, the worst part of the process of terminating an advisor happens at the very end, when you finally have to tell the guy the relationship is over.

Think about that love affair that just wasn’t right. You knew that he/she was wrong for you, but actually breaking off the relationship filled you with such dread that you finally ended it by text message. Shame on you – you’ll feel lousy about that for years. And the same is true of the relationship with your financial advisor – screw up the breakup and you’ll feel lousy about it.

Okay, maybe financial advisory relationships don’t pack the same emotional punch as love affairs, but, still, they can be almost as difficult to end. Let’s walk through the end game and see if we can learn anything.

Back in the days before email became the preferred – indeed, almost exclusive – means of communication for business, people fired their advisors in person or over the phone.

Having been on the wrong end of these conversations myself, I can tell you how they go. Here’s a pre-email-era phone call from a client we’ll call Eddie, made to me in mid-1999:

Eddie: Hey there, Humble Future Blogger, how’s it going, how’s the family?

HFB: Everybody’s good, Eddie, you?

Eddie: Terrific. But this isn’t a social call, HFB. I’ve, well, I’ve decided to terminate my agreement with you.

HFB: I’m sorry to hear that, Eddie, have you been dissatisfied with our services?

Eddie: Naw, you guys are great. Your performance sucks, though.

HFB: Ouch!

Eddie: I’ve been daytrading now for a year or so and I’m knocking the ball out of the park!

HFB: Did you say daytrading?

Eddie: Yep. I have a knack for it, HFB, everything I touch turns to gold! Don’t know why I wasted my time going to med school…

HFB: But, Eddie, the market’s in a bubble, everything’s going up! A monkey could pick stocks as well as you! [Ok, I didn’t actually say that last part, it’s just what I was thinking.]

Eddie: You just don’t get it, HFB. Revenues and profits are your grandfather’s metrics. It’s eyeballs that matter!

HFB: Maybe you’re right, Eddie, but if the time comes when you need an advisor again, I hope you’ll think of us.

Eddie: Will do, HFB, but don’t hold your breath.

Eddie never called me, but that’s because, post-Tech Bust, he no longer met our minimum account size.

Today, most advisory arrangements are terminated by email, sometimes followed up with a terse written confirmation. The email might read something like this:

Hello, Humble Blogger, we have appreciated your advice and counsel over the years but we have decided to switch our account to Ripoff Now, LLC, who will be in touch with you regarding the transfer of our assets. Kindly acknowledge this email. Thank you.

The written confirmation might say:

Dear Humble Blogger:

This will confirm our email exchange in which we gave notice of termination of our account, which communication you acknowledged. We appreciate your cooperation with Ripoff Now, LLC, in the transfer of our assets.

Sincerely,

Braindead Client

The biggest problem most investors have with terminating their advisor is that it’s often difficult to break off a long relationship, even a business one. Financial advice is a relationship business, and over the years advisors and clients sometimes create close personal relationships – even friendships.

So here are a few ideas about how to navigate this vexing situation:

First, although it’s too late now, never hire anyone it will be impossible to fire. This is why you don’t work with your sister-in-law or your son-in-law.

Second, once you’ve decided, however reluctantly, that you need to move on, engage the replacement advisor before you notify your existing advisor that he’s history. This will do two things: first, it will give you backbone, since you’ve already hired the new guy and you really don’t want to pay two advisory fees; second, the new guy can help you break the bad news to the soon-to-be ex-advisor and can protect you from any blowback.

Finally, think about it like this. If your advisor has done a bad job for you or is just no longer right for your needs, he knows that better than you do. You’re just working with one advisor, but your advisor has worked with many, many clients and he knows when he’s done a good job and when he’s screwed up. If he hasn’t affirmatively told you that you need to move on, he’s been ripping you off. Nobody should be reluctant to terminate a relationship with someone who’s ripping them off.

In this series of four blog posts we’ve looked at the question of why you should (or shouldn’t) fire your financial advisor (Parts 1 and 2), we’ve considered when to fire the guy (Part 3), and we’ve just learned how to fire him (this post), even if he’s a swell guy and you’re Godfather to his kids.

You are now an expert at firing financial advisors. But if you’re a client of mine, kindly forget everything you’ve read.

Next up: Spitting Into the Wind

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Please note that this post is intended to provide interested persons with an insight on the capital markets and other matters and is not intended to promote any manager or firm, nor does it intend to advertise their performance. All opinions expressed are those of Gregory Curtis and do not necessarily represent the views of Greycourt & Co., Inc., the wealth management firm with which he is associated. The information in this report is not intended to address the needs of any particular investor.