If you want to stay on track to retire and reach your goals, it’s a good idea to have a financial advisor.
But more and more, individuals are going beyond the standard. They are reaching out to multiple financial advisors to manage their assets. After all, what’s wrong with more expertise, peace of mind, and diversification? They might compare it to their medical needs—while they have a primary care provider, a patient might also need to see a cardiologist, podiatrist, or oncologist. Shouldn’t you employ specialists when it comes to your financial health, too?
This could be a good strategy for some, but not for all. At Generous Wealth Advisors, we believe in clarity when it comes to your financial picture, not further complications. If you find the right professional with the right specializations for your circumstances, you’ll only need one financial advisor.
In this blog, we’ll break down whether or not you should have more than one financial advisor and answer other questions to help you clarify your financial picture.
What Exactly Does A Financial Advisor Do?
Financial advisors are professionals who are licensed to offer financial advice. They help their clients make key financial decisions, like preparing for retirement, buying a house, or saving for a child’s education. They often wear many hats. Depending on their specialization, they can aid you with:
- Wealth management: Keeping track of your accounts, assets, and expenses.
- Financial planning: Creating a roadmap for your financial future.
- Generosity planning: Seeking out avenues for you to give to charities and causes you care about.
- Retirement planning: Supporting your retirement goals and budget for your spending years.
- Investment management: Coordinating various investment portfolios and types of investments based on your risk tolerance.
Essentially, a financial advisor takes what you have—your savings, assets, retirement accounts, and more—and creates a strategy for every dollar. And during big life changes, like the birth of a baby or a death in the family, they can guide you toward the most informed decisions. You can see why a financial advisor should be highly credentialed and experienced! They are tasked with applying their knowledge to your unique situation and giving you informed advice.
Some financial advisors are specialists in one area, like retirement planning or investing. If that’s the case, should you have more than one financial advisor? Let’s explore that.
What are the Benefits of Having More than One Financial Advisor?
While we at Generous Wealth Advisors typically advise against having more than one financial advisor, there can be benefits depending on your situation. We’ll explore some of those benefits before getting into the pitfalls you might experience.
- More perspectives. It’s never a bad idea to get a second opinion. It can be helpful to have a professional that you consult outside of your main advisor on a certain topic. After all, we financial advisors are not perfect and sometimes have our blind spots. An outside perspective might be able to spot something that another advisor can’t and provide a valuable second opinion.
- Additional expertise. As we said before, different advisors have different strengths. Some may specialize in areas like estate planning, tax law, or investments, and you might need that expertise. For example, Bill at Generous Wealth Advisors is recognized as a Certified Kingdom Advisor®, specializing in values-based investing. If your main advisor doesn’t share your faith or values, you may want to consult an advisor who does.
- Different products. Depending on the size of the financial advisor you work with, they may have limited access to financial tracking software and products. At Generous Wealth, we use a tool called Asset Map to help clients track their finances, but other fiduciaries may have different software that appeals to you.
What are the Drawbacks of Having More than One Financial Advisor?
We’re all familiar with the term “too many cooks in the kitchen.” That’s exactly what can happen if you have more than one financial advisor. They might start adding unnecessary ingredients to your financial recipe—and add more stress to your life. Let’s look at some of the drawbacks of having more than one financial advisor.
- Too many sets of eyes. To us at Generous Wealth, this is the biggest issue. Too many sets of eyes on your financial plan can dilute its effectiveness. When you consult with other advisors who are unaware of the bigger picture, this can cause conflict and differences of opinion. As a result, this can compromise your returns or increase your market risk. We encourage clients to get a second opinion if they aren’t feeling comfortable—but maybe not a third or fourth.
- More advisor fees to pay. Most advisors charge around 1-2% of assets under management (AUM) as a fee. Those fees can stack up quickly if you employ more than one advisor. Conversely, combining assets with one advisory firm may allow for a lower overall fee.
- Lack of clarity. Without having all of your assets under one person or fiduciary, you might not be able to tell if you are on track to meet your goals or not. That lack of clarity can wreak havoc on your peace of mind, especially if your financial advisors don’t collaborate.
- Competing strategies. Competing investment strategies can lead to an unhealthy bias toward your advisors. If your finances are temporarily “in the lead” with one advisor, it can lead you to make emotionally-driven financial decisions.
- Managing each advisor yourself. When people seek out financial advisors, they usually do so to take the stress off their plate. If you’re managing multiple advisors yourself, you may find that you have more work to do! You’ll have to act as a quarterback between them and make sure that their recommendations work together. This can also lead to a lack of a cohesive strategy, meaning your money might be even more scattered than before.
Why Should I Choose Only One Financial Advisor?
Now that we’ve discussed the benefits and drawbacks of using one or more advisors, let’s take a look at why you should choose only one financial advisor to manage your money.
- Lower cost. One financial advisor means fewer advisory fees to pay. If you combine all of your assets under one fiduciary, it may cost you even less than the 1-2% average fee.
- Comprehensive strategy. A team of advisors from one advisory firm or fiduciary can create a comprehensive strategy with your entire financial picture in mind. Many advisory firms employ several different professionals with different specializations, all to ensure that your money is in good hands.
- Tax efficiency. All of your assets under one manager can potentially streamline tax efficiency so you know how to optimize tax savings when you begin to withdraw from your retirement accounts.
- Diversification across accounts. Instead of diversifying your assets across advisors, one financial advisor can diversify your assets across accounts. Since your advisor understands your risk tolerance and investment preferences, they can make the right types of investments for you and your strategy.
- A strong relationship. By having one financial advisor, you can build a stronger relationship with them and their team. You’ll get to know each other over the years and they will take special care to know the strengths and weaknesses of your portfolio, your assets, and your goals for retirement.
- A more reliable partnership. When one person manages your finances, you don’t have to manage all the different parties involved. Your financial advisor can work with other financial professionals like CPAs for your annual taxes, attorneys for creating wills and estate plans, and other specialists. That’s why it’s important to find someone you trust and can develop a good relationship with.
How Do I Choose the Best Financial Advisor for Me?
It’s one thing to find a financial advisor—it’s another thing to find the right financial advisor for you. That’s why many people hesitate to hire only one advisor. Before you seek out a financial advisor, consider these tips for choosing a financial advisor that will work for you.
- Know your goals. You don’t have to have precise, clear-cut goals, but you should have an idea of where you want to be. Maybe you want to pay off your house in the next 10 years or retire before the age of 65. These are important goals for a financial advisor to know and understand. If you are close to retirement, roughly calculate how much you will spend each month and compare that to your current retirement accounts. Having an idea of this before you talk with a financial advisor will help them get on the same page with you faster.
- Know your values. Look for a financial advisor who shares your values. They don’t necessarily need to be in lock-step with everything you believe, just where it matters for your finances. For example, you might want to be more generous in retirement or only invest in certain ethical companies. Having a financial advisor who understands this will benefit you in the long run.
- “Interview” different financial advisors. Many advisors, like Generous Wealth, offer complimentary consultation calls, both over the phone and in person. It’s your chance to get a feel for what an advisor can offer you, and their chance to get to know you as a potential client. These are often no-obligation—advisors simply want to know if you are a good fit for their services.
Conclusion
In this blog, we explained the benefits and drawbacks of having more than one financial advisor, and how to find a financial advisor that will fit your needs. At Generous Wealth, we believe it is best to have all of your assets under one manager. You aren’t missing out on expertise or efficiency when you do so. Choose the right advisor with the values and experience that align with your expectations, and they’ll become your partner in the long run. Let’s explore whether Generous Wealth is the right partner for you! Schedule a complimentary call with Bill today.