Hiring a financial advisor has a multitude of benefits. They allow you to receive expert financial advice in addition to helping you plan strategies that will make it possible for you to attain your future financial goals, be that a new car, a new house, or a stress-free retirement. The question is, can the customer have a greater profit by hiring more than one advisor?
Although it may be generally advised that you hire only one financial advisor, there can be instances where you might have to seriously consider hiring another. For example, your one and only financial advisor may find there is too much on their plate if your finances are a little more complicated than an average person’s. Not only could that compromise the quality of your advisory service, but it could also increase the risk of things being overlooked and the chances of suffering financial loss. By hiring an additional advisor and properly allocating their responsibilities, you can ensure nothing is missed.
High-Net-Worth Clients and Clients with Extensive Portfolios
Clients that have extensive portfolios that may include real estate, global businesses, art and collectibles etc. would be advised that they have more than one advisor overlooking their finances. Affluent clients may have widespread wealth that may require not just two but a team of financial advisors to overlook their wealth and manage their finances. People who have acquired a vast amount of inheritance and are inexperienced in managing their newfound fortune may require multiple advisors as well.
Require Specialised Advice
Many would suggest putting all your money with one financial advisor may not be a wise idea and if you require specialized advice, individual experts for targeted advice may become necessary. For example, you may require a financial advisor to handle your general finances whereas an investment advisor to specifically handle your investment portfolio.
You may even consider hiring an advisor who is an expert in tax management while another may look over your general finances, and manage your bank accounts, your insurance plans, and your retirement plan. With expert, individual advisors focussing on different aspects, you can ensure that each of your financial areas is taken care of with proper diligence, attention, and caution.
Benefits of Having Additional Advisors
Having multiple advisors can be double-sided. This is a fantastic example of why not to put all your eggs in one basket. Having more than one advisor will allow you to have access to diverse points of view and access to even more diversified products. They can advise you on different strategies that may produce better financial gains in the long run.
According to Ron McCoy, a portfolio manager of the LOWS fund (Levered Options Writing Strategy) on Covestor, says “What works in one market may not work in another, and having two or three sets of eyes managing your money can be a plus. Having more than one advisor can also reduce ‘firm risk’ in the event you have all your money with one that is doing some unscrupulous things so you can avoid getting completely blown out as Bernie Madoff’s clients did.”
Additional advisors will not only help you avoid any unconscious biases that an advisor may have but may also improve getting the “return for your money.” Jon Ulin, a managing principal of Ulin and Co. Wealth Management says, “With many stories of individuals being sold investment products that were not in their best interest or invested in poorly performing portfolios, diversifying with two, three or even four advisors is not uncommon.”
Having more than one expert at your disposal means different aspects can be dealt with by experts in those particular areas. You can use the unique qualifications, experiences, and expertise of each advisor to your benefit. Also, having varying advice on how to manage your portfolio or achieve your financial goals will help you find the best strategy to implement.
Disadvantages of Hiring Multiple Advisors
Although diversification is a good strategy when it comes to managing portfolios, it may cause some complications.
Having multiple advisors may require more time and effort on your part to keep them which might end up compromising your professional and personal commitments and cause further mental stress. The “going-between” advisors may end up being a hassle and take up more of your time defeating the purpose of hiring help to handle your finances.
If your advisors are not aligned, it may result in conflict among them. Not every advisor might see eye-to-eye and they may have conflicting opinions and suggestions about which strategies to implement. This could cause confusion and add further stress to all parties involved and may increase the risk of compromised returns.
Keep in mind having more almost always costs more. If you are not getting value for your money, instead of helping your finances, you might actually end up suffering from financial setbacks. Also, if you are hiring more than one advisor for the same area, their approaches may differ or you may be getting redundant advice for twice the cost.
How To Decide Whether To Hire More Than One Advisor Or Not?
You might want to ask yourself some questions in order to decide whether you need to hire an additional financial advisor or not. The following are some suggested questions that may help you make the decision.
- Are your current needs being met with a single financial advisor?
- Are your finances too widespread for one advisor to manage?
- What size portfolio do you have, is it too large or diverse to manage for one advisor?
- Do you need specialised advice?
- Do you prefer multiple perspectives before making decisions about your financial strategies?
- Do you think you can make the effort and have the time to “manage” more than one advisor?
Having more than one financial advisor can become a necessity in some instances. If you have finances that are complex or if you require specialised advice for different aspects of your finances, it would serve you best to hire multiple advisors. Remember, having more than one advisor requires serious consideration. Since you are the customer, whose time and money is going into the advisors, make sure it is worth it for you.