We do believe people should have a financial advisor. Advisors can help you with how much and what type of insurance you may need, planning for your estate, how to invest your money, what you can do to help reduce taxes, and most importantly, how to get the most enjoyment from the money you worked so hard for.
If advisors are great, you might be thinking, “Should I have more than one financial advisor?” Generally, we do not think this is good idea. The reason is if you’re turning to several advisors, you become responsible for what each advisor is doing, as if you were managing your own accounts. Ultimately, it creates more work for you as the “go-between” and you may be reducing efficiencies in the process.
Wealth planning approach
Our fiduciary financial planners take a holistic approach to your wealth planning. Together, we determine investment vehicles that will help you reach your financial goals and retirement aspirations. This might be money management through mutual funds, rebalancing your existing portfolios and diversifying. We can even look at tax-efficient investments, charitable giving and appropriate insurance coverage.
But those efforts may not happen if you have more than one financial advisor. If you have one broker managing one sum of money, another advisor managing another portfolio of money, an insurance agent managing a third, a robo-advisor with some side investment money and so on, the result is that you end up being the guide. You become the one who must coordinate the activities of all your advisors. It’s a lot of work. And if you’re not sure about what each entity is doing – or whether they are working cohesively on your behalf, it can create estate planning and tax implications.
Additionally, two things could happen:
- Their recommendations might conflict
- It could be redundant advice.
Neither scenario is optimal to growing your wealth. Your financial well-being is one of the most important reasons you should not have more than one financial advisor.
Fiduciary advice from a single entity
To reduce conflicting advice and investment strategies, we suggest only one firm manage your situation.
This helps ensure that the money your advisor is managing doesn’t interfere or overlap with what you may be doing on your own or with another firm.
Also inform your financial advisor of:
- 401(k) plans you may have through an employer and where it is invested;
- If you have a stock portfolio with a discount broker; or
- Any other investment vehicles that he or she would not be managing.
If you have only one advisor orchestrating everything for you, then not only are you are free of the workload, but you can be assured that they can see your entire financial picture. It helps reduce the risk that the left hand doesn’t know what the right hand is doing.
For example, at Edelman Financial Engines, we can help coordinate communication between your estate planning attorneys, tax advisors and our team of professionals so that your wealth planning efforts are synchronized.
So, unless you have a coordination of effort, you could be reducing the efficiency of the wealth planning goals you’re trying to accomplish. You also could be incurring greater expenses by employing multiple advisors who are performing redundant or overlapping tasks.
Therefore, we recommend that less is more when it comes to the number of financial advisors you work with – and unless you have the time and skills to be the liaison between everyone – you should pick one person. And, of course, make sure you hire the right person!