After the end of the NFL regular season, I was surprised once again by the large number of firings by all kinds of teams. In some cases, like the Colts or Rams, it is understandable to some degree because things went so badly that inaction would have reflected very poorly on those teams. But what about teams like the Chicago Bears, that had an 8-8 season, missed the playoffs but did have great reasons. The fact that their two best offensive players got injured surely had something to do with their sudden slide in the rankings.

What about you? When your broker sends out information about your statements and that things have not been going well, do you consider a change? What about if they have great excuses to explain the poor performance? I mean could you really fire your broker for delivering a poor performance in 2008 when the market was absolutely crushed?

Do You Only Consider Change When Someone Offers You An Alternative?

Unfortunately, it seems like so many do not want to take the initiative of firing their broker. They will generally wait to be approached by someone else and once they get a good enough agreement, they’ll cross over and change. That sounds crazy. Do you think that coaches are only fired when another one offers his service to the GM?

It’s All About Expectations, Don’t Take Excuses

One of the more critical aspects of having a broker or financial adviser helping you manage your money is that there should be a very clear understanding as to how the money will be managed. Will there be a lot of risk (and thus volatility) involved? Or Not? Once you come to an agreement, you should know what type of profile your portfolio is supposed to have and thus how it should react more or less under different markets. The best example would be an investor that does not want risk and has 80% or so of his assets invested into bonds. If the stock market cripples, that should not give an excuse for terrible returns.

Communications Is Key

There is nothing wrong with telling your broker that you expected a different return. In fact, you should tell him because chances are that you do not have the same understanding of how the portfolio should react. Yes, there is a part of the returns that will be determined by which specific stocks or ETF’s are bought. But by far, the most important factor of your returns is the asset allocation which both of you should agree on.

Don’t Wait Until It’s Too Late

Any good broker should be more than happy to get questions about your returns. If you do not feel like such comments/questions are welcome, you have a good indication that you might not be working with the right guy. It’s important for you to voice your expectations rather than let yopur questions build up over time. If your broker has the right skills, he should be able to make the portfolio’s returns look more like what you’re expecting.

Do remember that with better expected returns also come more risk… there is no miracle recipe. Sure, there are some better brokers than others…

What You Should Expect From Your Broker Or Financial Adviser

-Regular communications regarding your portfolio, returns, etc
-Answers to your questions
-Returns that are comparable to what you would expect given your portfolio asset allocation
-Consistency of the returns over the year (there is nothing wrong with performing a bit less than expected for 1 year.. But over time time it should improve)

Have you ever fired your portfolio manager/broker and if so why?

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