7 reasons to fire your financial adviser

By Liz Pulliam Weston

Peter Coyote was delighted with the returns money manager Reed Slatkin was making on the actor's investment portfolio.

Then Coyote discovered Slatkin's accounts weren't covered by the Securities Investor Protection Corp., which insures brokerage accounts against bankruptcy or fraud. That fact made Coyote nervous enough to close his account with the charismatic Santa Barbara, Calif., money man.

Coyote told me he didn't suspect anything was wrong. He just wanted his money to be insured.

Coyote's actions would prove prescient. Five years later, Slatkin filed for bankruptcy and regulators uncovered a massive Ponzi scheme that defrauded hundreds of investors, from Hollywood elite to retirees on fixed incomes.

The fabulous investments Slatkin boasted about were so much smoke and mirrors. He used new investors' money to pay bogus returns to prior investors, and he skimmed plenty of cash to pay for a lavish lifestyle that included a secluded estate and pricey artwork.

Your personal financial adviser doesn't need to be a con artist on such a grand scale to warrant a pink slip, however. There are plenty of other reasons to fire someone, from incompetence to arrogance to simple personality clashes.

If you're hearing any of the following from someone handling your money, consider pulling the plug.

'Who cares what you think?'

Financial planner Kelly Auslander of Orlando once worked for a brokerage that asked her to try to retain clients alienated by one of the company's star brokers.

"He bullied his clients, yelled at them and treated their money as if it were his," said Auslander, a certified financial planner who serves on the board of directors of the Financial Planning Association of Central Florida. "The story was the same every time: The broker did not listen to the client, did not take (the client's) time frame, risk tolerance, goals or objectives into account. In every instance, the client felt unheard and out of control."

Auslander knows some clients are intimidated by their advisers' titles or auras of authority. But it's your money, not the adviser's, and if he won't listen, "you need to break up," Auslander said.

Obsessing about every little twitch in your account value isn't healthy. On the other hand, neither is long-term underperformance -- at least when we're talking about your financial health.

If your portfolio hasn't at least matched the relevant benchmarks over the past two to three years, said Los Angeles tax attorney Phil Holthouse, it's time to consider some kind of change, including firing the underperforming adviser.

'Don't worry your little head'

Letting an adviser take over the reins can be "so very seductive," said author and H&R Block heiress Barbara Stanny. "You just want to be taken care of -- we all do."

But you need to understand what's going on with your money, and you should be wary of any adviser who blows off your questions or tries to make you feel stupid for asking.

"A good financial adviser," said Stanny, who wrote "Prince Charming Isn't Coming: How Women Get Smart About Money," "wants an educated client."

Don't just assume your caretaking or condescending adviser can't switch gears, however. Stanny recommends soliciting friends for referrals to other advisers, then using a prepared list of questions (like the CFP Board of Standards' "10 Questions to Ask When Choosing a Financial Planner") to interview two or three of them. This exercise can inform you about how a good adviser-advisee relationship is supposed to work. Then you can return to your own adviser and discuss your need to be more involved in your finances.

Ideally, your adviser will respond enthusiastically to your desire to be a full-fledged partner in your financial situation. If not, you've already started the interview process for her replacement.

'It's not my fault ... and if it is, too bad'

Human beings make mistakes -- it's inevitable. What separates the decent advisers from the cads is how they respond to their own errors.

The right way: Acknowledge the mistake and cover the appropriate costs. If your tax pro goofs on your return, for example, she should prepare and file an amended return at her own expense, said enrolled agent Eva Rosenberg, plus pay for any penalties incurred.

What you shouldn't expect, Rosenberg said, is for the pro to cough up any additional taxes you owe.

"You would have had to pay that money anyway" had the return been prepared correctly, said Rosenberg, who runs the TaxMama.com Web site.

(Good tax pros are divided about who should pay any additional interest assessed, by the way. Rosenberg figures it should be the client because she had use of that money during the time it was owed to the IRS. Other pros said they would pick up the interest as a measure of good faith.)

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