Have you ever pondered how many financial professionals you need? I ask because I know that about 1/3rd of my clients work with me and at least one other advisor. Naturally I feel a little competitive and want to know that I’m the ‘lead’ advisor or primary advisory in terms of giving investment advice and financial planning recommendations. More importantly, I want to make sure my clients aren’t doing themselves a disservice by having multiple advisors who don’t communicate with each other. This has me wondering how necessary it is to have multiple advisors. If you do, in what ways are you adding value, and are you perhaps decreasing the likelihood of reaching your longer-term financial goals?
My first observation is that some people have taken the advice of diversifying their investment portfolio and started applying it to their investment professionals as well. I suppose the thought process is that if multiple asset classes reduce risk during a recession than multiple financial advisors will also reduce risk during a recession. The exact opposite may be true: because each of your advisors will manage your portfolio independently, investors will often find they have overlapping exposures with multiple advisors. That could include overexposure to a single stock or a single sector. There may also be a difference of opinions between advisors which causes a totally unbalanced overall portfolio. I think the problem isn’t so much having multiple advisors, rather having a lack of communication and lack of clarity about who’s in charge of what and how often these professionals should speak with one another.
I’ll tell you one of the most common places where this happens: your 401k plan at work. Your retirement plan will often send representatives to meet with you once or twice per year and go over your investment options and things of that sort. Even if they don’t, you probably have a customer service group which you can contact for advice. The discussion of your other accounts and overall tolerance for risk will often not be properly addressed and you may immediately be adding exposure risks which you aren’t aware of. The best thing to do would be to contact your ‘lead advisor’ and share your 401k allocation with him or her. They can then help you make those allocation decisions and factor them into your overall financial plan.
At my firm, we use comprehensive planning software which aggregates data and carefully tracks each of your accounts on a daily basis. With this tracking ability in place, you are always able to view your portfolio allocation and changing net worth, even if some of your assets are held elsewhere. I think it’s important to have an accurate and up-to-date measure of your finances at all times.
My concluding advice here is to make sure you have an appropriate lead advisor. If you only work with one advisor and that person is reasonably competent, you should be set for now. If you do have multiple advisors, try to find the one who is best able to understand your situation and give them a larger share of the work. This person should have the contact information of your other advisors and should be able to contact them to aggregate all of your data and be able to see a ‘big picture’ at all times.
As always, feel free to contact me with any questions or comments.
Premier Financial Advisors, Inc
14 E 60th Street, #402
New York, NY 10022
P: 212-752-4343 *31
Securities and certain investment advisory services offered through: First Allied Securities, Inc., a registered Broker/Dealer. Member: FINRA/SIPC. Premier Financial Advisors, Inc. is a Registered Investment Advisor. First Allied Securities & Premier Financial Advisors are not affiliated entities.