Do You Have a Lead Advisor?

A new report from State Street Global Advisors and the Wharton School Taking on the Role of Lead Advisor: A Model for Driving Assets, Growth and Retention offers some insights into how investors’ loss of confidence in markets during the recession prompted many to begin managing their money themselves or to engage multiple advisors to diversify the risk they perceived of working with just one advisor.

However, because multiple advisors rarely share information about the clients, the report found that investors working with multiple advisors can easily and mistakenly take on too much or too little risk relative to their financial goals. Specifically, the report notes, “Using multiple advisors to work out portfolio strategies independently often can lead to overlapping exposures or to divergent allocations that result in neutral market positions.”

To guard against this risk, the report suggests that investors may want to consider appointing a lead advisor to oversee the entire investment portfolio. That’s how I think of myself – as my clients’ personal chief financial officer – working to identify and prioritize goals and develop a clear plan for how they will reach them.

As the State Street/Wharton report points out, this “lead advisor model” is one successfully used by advisors to the ultra high net worth. Especially because, more than ever, investors desire unbiased, personalized financial advice they can trust, it makes good sense to working with a fiduciary who oversees all your investments, across all accounts and among other professionals and coordinates with other professionals, such as CPAs and estate planning attorneys.