Benjamin Beck, CFP®“Is it okay for a client to have multiple financial advisors?” This is a question I am asked every now and then. Fair enough. It’s something that clients wonder about for sure, as do some advisors. I thought I’d take you through my thought process as it relates to answering this question. But first, a story.
Let’s say you had a longtime client who passed away, and now there are considerable assets that have passed on to the next generation. You have a good relationship with the beneficiary of all that wealth, but it’s nowhere near as close as the one you had with the parent, with whom you built trust for years. I was in this position recently.
As I was having lunch with my client’s son, with whom my connection is not quite as deep, he casually slipped this into the conversation: “Ben, I have come into considerable wealth, and I wonder if it makes sense to take this large amount of money and split it among several advisors.” This was followed by, “I know this other advisor, and he thinks I should be doing this or that with the money, so I thought, why not do both?” he added. “What do you think?”
And there it was. I took a breath, and said, “Absolutely not.”
Why Having Multiple Financial Advisors May Get In The Way Of You Reaching Your Goals
I asked him to remove me, Ben, from the equation, and to simply view the situation from the standpoint of a person who is committed to a financial plan “The financial plan we put together for you is the most important financial document in your life,” I explained. “The idea that you should split up your money amongst other financial advisors who are not operating proactively on the plan that we've established and that you have agreed to implement with a significant portion of your net worth is at minimum dangerous, and potentially absolutely crazy.” I said it and I meant it.
I truly believe that there should be one relationship that knows you inside and out financially. Obviously, so long as there is trust and the client is comfortable with and confident in the plan. We are not talking about strong-arming people into working with us. The underlying assumption is that a client would not sign a document if they weren’t sure that this is how they should proceed.
In my conversation with this client, I went a step further. I wanted to know what was behind the question. The only way to find out was to ask, “I’m wondering, what in our relationship thus far may cause you to consider involving another group?” I know it sounds pretty forward, but it was important to get to the point. “No, no,” he said. “I have a great relationship with you guys.” “I’ve just never had this kind of money before,” he added, “And I thought to protect myself, I might diversify with different managers and advisors, you know…”
I explained again that the best outcome is in place and achievable with one group or one person understanding fully and executing on the plan that has been put in place. It doesn’t matter if it’s with us or with anyone else, the execution must follow according to a single plan.
I had a moment of realization as I spoke with him. As I tried to understand where he was coming from, I was left with a sense of regret, a missed opportunity. I had focused so much on building a relationship with his parent, that I had neglected putting the same kind of energy into building as deep of a relationship with him. Some of the things that we talked about with his father, who's no longer with us, were about the different phases of planning for retirement. We had spent time talking about what it takes to accumulate funds to retire at a certain level of income, and what you need to do in the distribution phase of the plan. We had discussed risks and pitfalls that exist during a 30 or 40-year retirement; everything from sequence of returns risk to loss of purchasing power. I had educated his father on the risk that most investors neglect to face, that is behavioral risk. I’m talking about the fact that we are all human: emotional beings who have the potential to second guess our decisions, and under extreme circumstances are prone to act on impulses that are not part of the financial plan.
We did all this with his father, but we didn’t do it with him. He’s only in his early forties, but it’s never too soon to have these conversations. As much as we do focus on client relationships and client education, this illustrates to me the necessity as advisors to make sure we explain, over and over and over, what we do and why we do it. Even if it’s not applicable to a client’s financial situation at this moment, you never know when that moment may come. Who knew his father would pass away prematurely? Who knew his father would not get to have the retirement he envisioned? That instead, the son would end up inheriting this money and then be overwhelmed with the gravity of making decisions about it?
The True Role of Financial Advisors
As advisors, we can’t just accept it when clients say to us, “Oh, I know the market goes up and down,” that it’s clear to them what it is that we do, and why we do it. Our value proposition is so much bigger than investing. Our value is in keeping them true to their own dreams. As a true investment professional, I cannot accept anything less than the entire account. It wouldn’t be right for the client. How could I in good conscience earn my fee if I am not bringing my full value to him? Knowing that the real value is not just my investment expertise, but the value of keeping the client true to the plan. Even if a portion of that money were 5 or 10 million dollars – an amount that many advisors wouldn’t turn away – it would not be the right thing to do.
An All-or-Nothing Approach
All or nothing has nothing to do with how I stand to gain financially in this, or how good it makes me feel about myself. No, for me, all or nothing has to do with the level of conviction I have about my own value. I know what I bring to the table, I know what Beck Bode brings to the table, and I am not going to settle for anything less than that. I guess a point I need to make is that that hasn’t always been the case. I didn’t start out my career thinking first you need to establish a plan, and then you fund it with an investment portfolio. I learned this over time, through experience. When I was younger, I didn’t see my value as clearly as I see it now. I know what it feels like to want to satisfy the client, to give them the answer they want. The journey here has been an evolution.
You Don’t Need More Than One Financial Advisor — You Need Conversations
If you’re facing a situation where a client is considering something other than what you believe in, it’s important to stick to your convictions. It’s equally important to consider what it is that’s driving their behavior. It’s likely that the person simply doesn’t understand your value, or that the trust that’s needed hasn’t had time to develop.
Instead of making an ultimatum, you may want to use the opportunity to have a conversation.
Ben Beck is Managing Partner & Chief Investment Officer at Beck Bode, a deliberately different wealth management firm with a unique view on investing, business and life.