Are Multiple Financial Advisors a Smart Idea? What You Need to Know

Working with a financial advisor to help you achieve your financial goals has become increasingly common. Where once people considered financial advisors and financial planning in general only appropriate for the very wealthy, now people from a broader range of income levels are interested in creating a comprehensive financial plan for themselves and using a professional to help them do so.

If you have one financial advisor, you might wonder whether that one is enough. Maybe you have considered multiple financial advisors to address multiple distinct financial needs. Maybe you’re wary about putting all your assets in one advisor’s hands and are wondering if multiple advisors might mitigate that risk. Whatever your motivation, if you’re considering hiring more than one financial advisor, here are a few pros and cons to think about.

The Cost Factor

The Time Factor

Alternatively, you could decide instead to designate one primary advisor and direct the rest of your financial advisors to report to that person before they make decisions. This can be a workable alternative to free up your time, since you can communicate your needs and goals with one primary individual, rather than having to spend a lot of time talking with each advisor individually. The key to effective use of multiple advisors is, of course, communication.

Consider a Specialist

The Cons and Caveats

However, for this strategy to be effective, you must ensure that your assets really are being diversified, and that your team is working in concert. In some cases, the overlap created with multiple financial advisors has the potential to put you at risk. If more than one advisor chooses to purchase the same assets, the result could be that you end up with too much exposure in one asset class.

That’s why all your advisors must be working under the same strategy, and each must know what the others are doing. Remember that none of them will be able to provide good advice if they do not have a comprehensive understanding of your finances. They need to be able to see the entire picture-your total income, liquidity, wealth, debt, and risk exposure-and not just the assets they’re managing. Advisors have a fiduciary duty to do what’s best for their clients, and they usually need to understand your whole picture to fulfill that.

For those individuals looking for a more diverse approach and reduced risk, but who are not comfortable with multiple financial advisors, the alternative is to look for an advisor or firm with experience in multiple financial specialties. In many cases, an advisory firm that utilizes this kind of team approach is a great solution. This way, you can get the benefits of multiple advisors with different specialty areas.

Consider Your Goals

Originally published at http://robertryerson.com on April 6, 2021.

Robert Ryerson authored the 2016 book What’s the Deal With Identity Theft?: A Plain English Look at Our Fastest Growing Crime.

Robert Ryerson authored the 2016 book What’s the Deal With Identity Theft?: A Plain English Look at Our Fastest Growing Crime.