When it comes to financial advice, are two or three heads better than one?
If your financial adviser is already helping you to meet all of your financial goals, then there would be little need to employ another one. However, if your adviser is not meeting all of your financial planning needs, or is not able to help you in specific areas, such as Pension planning, then you may need to consider find another financial adviser to add to your team. In this case, you may want to find an adviser that can help you with Pension planning as opposed to one that specializes in a different area.
You do however need to make sure that all of your financial needs are being covered.
Do I need more than one adviser to manage my investments?
Everyone knows the old adage goes, “Don’t keep all your eggs in one basket”. Especially when it comes to investing. So, this does pose the big question, “Will having two or more financial advisers help keep my investments diversified?”
I don’t think it does and here’s why. Assuming that your financial advisers knows what they are doing when it comes to managing wealth and is ensuring that your portfolio is well diversified, having more than one adviser could in fact be harming your overall financial plan, in fact, it could be doing you much more harm than good.
Here’s an example, let’s say adviser number one advises you that the UK stock markets are overvalued and recommends changes to your investment portfolio. Adviser number two on the other hand believes that UK stock market is undervalued and tells you to increase your exposure. The two recommendations are directly conflicting and cancel each other out. You have two financial advisers and realistically two separate advice recommendations that cancel the other out.
Furthermore, having two financial advisers may cause your advisers to take more risk in an attempt to increase the returns. If you like, competing with the other adviser, instead of looking after your overall financial plan!
This task of managing your financial plan or your retirement plan, can be accomplished by a competent financial adviser with relative ease. Having two financial advisers just creates a greater focus on investment returns and not the overall financial objectives. Don’t get me wrong, investment returns are very important, but financial goals and objectives should not be driven by returns. Also, encouraging two financial advisers to compete on investment returns is really not a good idea.
Not only can having two financial advisers lead to a huge conflict in terms of performance, it also puts the main focus on short-term investment performance – which is the only way to compare advisers, again removing the focus from your ultimate financial planning objectives.
The financial adviser’s job is to look at your overall financial position, establish where you are now, identify your goals, and help you make the right financial decisions. A good financial adviser will help you to create goals and help you track the progress you make towards your goals. There are a lot of component parts to a financial plan and it is difficult to keep track of what has been happening if you have more than one adviser.
Who’s in charge?
If you have more than one adviser, it would be wise to have at least one of them know exactly what the others are doing so that you can effectively coordinate your complete financial position.