A Trusting Relationship is a Two Way Street

Trust is a curious thing. Having faith in someone – trusting a person or an institution can be a bond that is stronger than steel. Witness a mother bonded to her young child, or a soldier’s unflinching obedience to a commanding officer, or how you feel when you board an airplane for a flight. The weight of the world can hang on the bond of trust. We will literally step into the void holding only a thread of trust.

Naturally, you want to work with a financial advisor who tells the truth and looks out for your best interests. As I’ve said before, you owe it to yourself to work with an advisor who is sworn to act as a fiduciary and therefore bears the legal obligation that requires them to act in your best interest at all times.

However, trust is a two way street. To gain the most from your financial advisory relationship, don’t keep secrets from your financial advisor. That is, you also must trust your advisor enough to fully disclose all your financial assets and liabilities, your dreams and desires, your hopes and your needs, your fears and worries, even if the truth isn’t comfortable to discuss.

Interestingly, many investors apply the concept of diversification as a risk reducer to purveyors of financial advice and work with multiple financial advisors. There’s no question that in today’s complex, challenging market you require the expertise of financial advisors, CPAs, estate planning attorneys, even insurance professionals and bankers to manage your wealth accumulation, preservation, and transfer. However, new research from State Street Global Advisors and the Wharton School at the University of Pennsylvania illustrates how using multiple advisors -- who often do not communicate with each other -- can increase rather than dilute risk and put you in danger of not achieving your short- and long-term goals.

Specifically, because multiple advisors work out portfolio strategies independently you might be left with overlapping exposures or an unintended over concentration in an asset class. Especially in this challenging market, you need a firm like ours that functions as a personal chief financial officer to take a complete, aggregated view of your finances and prioritize sometimes conflicting needs and goals.