Are you cheating on your financial adviser?

Are you cheating on your financial adviser? As an adviser, I know my clients don't usually think of it in those terms, but maybe you should. Research provided by the financial services research firm Aite Group indicates that only about one in three clients turns over all of their assets to one financial adviser to manage. While the reasons vary, two seem to be the most common: 1. The investor has personal relationships with multiple financial advisers and doesn't want to hurt anyone's feelings. 2. The investor wants different “opinions” and research on how best to manage their money. Essentially, the more advice the better. The first reason is very practical. As a businessperson, I try to do business with those who do business with me. So I completely understand when one of my clients tells me they need to have an account with another firm(s) for this reason. No one can dispute the logic here. The second reason, however, is something the investor needs to reconsider. On the surface, more information and advice would seem to be a good thing. But here's where the dilemma comes in from the viewpoint of the financial adviser: How can we be expected to construct a well-rounded plan if we are only managing part of your assets? Think of your relationship with your spouse or significant other. In the early stages, you probably dated around a little, trying to figure out what you were really looking for in a long-term relationship. Over time, your wants, needs and expectations clarified and you ended up committing to someone. There are good times and bad, but together you work through them, always with common goals. It's not so different when an investor works with a financial adviser. If you never fully commit to the adviser and his or her plans/recommendations, why should he or she commit to you? That door swings both ways. No one likes to feel as if he or she is “competing” for someone else's affections (or business) and that type of relationship generally doesn't end well. Before you commit, however, ask the adviser how many clients he or she has and where you would fit in. Monogamous relationships are only successful when both parties commit. Sadly, many financial advisers have 500, 1,000 or more clients. They cannot feasibly take care of them all. These advisers tend to pay attention to the clients that generate the largest revenue streams and typically ignore the rest. I am a firm believer in client/adviser monogamy and there are plenty of advisers who share my philosophy. In order to have a well-thought-out plan provided by someone who has your best interests in mind, you need to vet your adviser prospects and firmly commit to financial monogamy. Phil Wood is president and chief executive of One Price Portfolio, a national, independent investment firm which specializes in managing portfolios with a capped fee.