Do You Need More Than One Financial Advisor?

For years, the media and the financial industry have both urged consumers to choose a financial advisor and develop a plan to reach their financial goals. While this is certainly a good idea, some clients have taken this a step further by using more than one advisor to manage their money. In some cases, this can be another wise move, but not always.

The question of whether you need more than one advisor to achieve your financial goals will depend on several factors. (For related reading, see: How Gen X Should Plan for Retirement.)

If you already have one financial advisor, then you obviously don’t need to find another if he or she is helping you to meet all of your objectives. But if your advisor is clearly deficient in one or more areas of financial management such as estate planning, then you probably should start looking for another addition to your financial team. In this case, you may want to simply find an estate planning attorney or bank trust officer as opposed to another financial advisor, but you need to make sure that all of your needs are being met.

A harder question to answer is whether you need to have more than one stockbroker or investment advisor. If you aren’t sure that you’re getting the best bang for your buck from your current money manager, then you may want to talk to someone else in order to get a second opinion. A key factor here is the types of investments that your current manager is using; if you are now largely invested in low-cost index funds that are tanking because there is a bear market, then you’re probably not going to be much better off moving your portfolio to someone who will trade your money more actively, because numerous academic studies show that the vast majority of active money managers ultimately lag the market indices over long periods of time.

Therefore if you decide to move some or all of your funds to another firm or manager, be sure to think through the reasons why you are doing so. If you feel that the second advisor’s investment philosophy is more realistic or can show that it could get you better results or the same results with less risk, then moving may be the right choice. But you should be able to concisely quantify the reasons why you are dissatisfied with your current advisor before you decide to go somewhere else. (For related reading, see: What Advisors Can Learn from 2 NBA Millionaires.)

If you do end up using more than one advisor, it would be wise to have at least one of them know exactly what the others are doing so that you can effectively coordinate all of your finances. For example, if you hire one advisor to give you a comprehensive financial plan and also use a stockbroker to manage your actual investments and a State Farm agent to cover all of your insurance needs, then your comprehensive advisor will need to know what you are doing with the others, as well as know your company retirement plan and your bank accounts. (For more, see: 5 Things to Ask Before Hiring a Financial Advisor.)

Having more than one financial advisor may be necessary in many cases, particularly if your financial situation is complicated and requires several areas of expertise. But it is important that all of your advisors or brokers are ultimately on the same page with you in order to ensure that they do not end up working against each other. For more information on finding a financial advisor or whether having more than one advisor is right for you, visit the Financial Planning Association website at www.fpanet.org. (For related reading, see: Investing Tips for Those Nearing Retirement.)