Your Money  |  Wealth Special Section

Making an Adviser Relationship Work

By FRAN HAWTHORNE   NOV. 11, 2015

In spring 2001, after losing about $75,000 in the dot-com crash, Jerrie Champlin and her husband, Robert Baranowski, decided it was time for professional help.

The couple, then living in Rockland County, a New York City suburb, found a local financial adviser who seemed to have strong Wall Street experience. They were further reassured by a 90-minute interview with him in which they discussed their goals and the adviser’s philosophy.

Over the next three years, however, the relationship deteriorated.

“He was not really paying attention to who we are,” said Ms. Champlin, 62, a former business manager. “Bob would have an idea, and it would be, ‘No, that doesn’t really fit with the plan.’ He decided what level of risk we would be willing to take.”

The couple moved their $562,000 portfolio to a larger firm after Mr. Baranowski met one of the principals at a retirement-planning workshop at BMW, where Mr. Baranowski was a senior manager. (Mr. Baranowski, 64, and Ms. Champlin have since retired and live north of San Antonio.)

“There was a chemistry that worked” with the new adviser, Mr. Baranowski said. “He took into account all the other aspects of life that go with financial planning, including our five dogs.”

More than one-third of households in the United States regularly use a financial adviser to assess an overall financial situation and set up an investment strategy, according to Cerulli Associates, a global financial services research firm based in Boston. The average such household has $406,000 in investable assets.

Some of those millions of investors occasionally become dissatisfied, especially after paying fees that typically start at 1 percent to 1.25 percent of assets. Each year from 2009 to 2013, 7 to 10 percent of North American households dropped their advisers, the research firm PriceMetrix said in a December 2013 report, based on data from seven million investors. Such dissatisfaction tends to increase in times of financial downturns, or developments such as the recent volatility in the markets.

Among the biggest concerns are personal rapport and communication, along with investment returns. Other issues include location, staff turnover, a desire for more control and outright misconduct.

“It’s like developing a friendship,” said Leslie C. Quick III, a partner at the investment advisory firm Massey Quick & Company, based in Morristown, N.J., which manages $2.6 billion. “You may have gotten your wires crossed, but if there is trust, you can always figure out how to get back on the same wavelength.”

After a first-year “honeymoon,” client loyalty slips over the next three years, then stabilizes, the PriceMetrix report found.

The strongest relationships start with a detailed discussion of matters like lifestyle, risk tolerance, goals, investment strategy and the kind of communication the clients want. After that, there will typically be performance reports at least quarterly; an annual in-person meeting lasting one hour or more, preferably at the adviser’s office; and additional meetings, video chats, emails or phone calls as needed.

At the Wescott Financial Advisory Group, based in Philadelphia, which advises on $2.3 billion in assets for more than 500 clients, Catherine M. Seeber, a senior financial adviser, said she contacted her clients every six weeks and sent cards for birthdays, weddings and the like. “If you don’t communicate,” she said, “people think no one’s looking at their needs.”

In talking with clients, advisers emphasize that markets fluctuate and investors need to be patient for the long term. It is unfair, they say, to fire an adviser based on returns over less than three to five years.

Nevertheless, when the bear inevitably lumbers in, “some clients are going to jump around from adviser to adviser, looking for a person who’s going to have a crystal ball,” said Robert Gerstemeier, who until last month was chairman of the National Association of Personal Financial Advisors.

Even the sophisticated members of Tiger 21, an elite club whose 345 members control assets totaling more than $30 billion, may be too quick to want to change. Several times a year, a member will tell fellow club members, “I’m thinking about terminating a relationship with an adviser because their performance was terrible,” said Michael Sonnenfeldt, a co-founder of Tiger 21.

In about one-third of those cases, he added, fellow members persuade the unhappy colleague to keep the adviser, by suggesting “what was a reasonable expectation, given the complexity of the market.”

Because the best relationships are deeply personal, anything that breaks the one-on-one bond can also be a reason to change.

People often seek a local replacement if they move to a new area. If the advisory firm undergoes major personnel or ownership changes, or if the client’s particular adviser leaves, “you should reassess your relationship,” suggested Paul Smith, president and chief executive of the CFA Institute, a trade group that administers certification exams.

“People should be more engaged with their advisers, more questioning,” he said.

On the other hand, some investors might balk at spending hours re-explaining their circumstances to a new person. To avoid that situation, advisers work in pairs at Modera Wealth Management, the Boston-based firm that Ms. Champlin and Mr. Baranowski now use. Thus, when one adviser relocated to California early this summer, her 60 clients still had her teammate, said Mark Willoughby, chief investment officer of the firm, which manages $1.7 billion for 950 families.

Fraud, sloppiness and other misconduct are clearly red flags. In 2012, Diane Blasco, then 55, of New Canaan, Conn., told her broker that she wanted to add some low-risk, high-income stocks to her portfolio of conservative mutual funds, which had assets in the mid-six-figure range. Instead, she said, the broker put more than $25,000 into a risky tech stock that soon plummeted, and within less than a year she had lost almost $12,000.

“I looked at what he was charging, and I said, ‘I can do this myself,’ ” said Ms. Blasco, a former sales representative and interior designer who has begun a career coaching young people about money, incorporating neuroscience and behavioral economics to help clients rethink their financial habits. She transferred her portfolio to a self-directed online brokerage firm, although she consults regularly with a new financial planner.

A version of this article appears in print on November 12, 2015, on page F7 of the New York edition with the headline: Advice, Then Dissent.

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