Part 6: Great Financial Advisors Do More than Manage Assets

  • June 27, 2018


    There is much more to a healthy financial path through life than good asset management. Comprehensive financial advisory services should include managing liabilities (e.g., mortgage borrowing), optimal tax planning, estate planning, controlling for risks such as the financial consequences of premature death or outliving one’s wealth, and catastrophes. Sound decision making across the spectrum of choices requires a broad and solid understanding of the investor’s financial sophistication, goals, financial circumstances, risk tolerance, and other aspects that can affect the client’s financial future.

    There can be substantial merit to retaining a financial professional who can see the entirety of relevant information regarding the client and integrate the information and decisions into a cohesive path. For people with substantial means, a skilled and unbiased financial professional can coordinate various specialists serving the client’s needs. The search for a great long-term financial advisor is not unlike the search for a great place to live or retire; the search should be based on a comprehensive analysis of all the facts and facets – not just one factor such as asset management.

    The bottom line is this: commission-based financial planners seem to always find that the client needs more transactions, more insurance, more annuities, and more loaded mutual funds. Commission-based brokers talk clients into buying an asset and then soon thereafter need to find an excuse to tell the client that they need to transact again. Note that the asset they so highly recommended a few years ago suddenly needs to be sold. The reason given may be to “cut losses short” if it has gone down, or to “take the profits” if it has gone up; but until conflicts of interest are brought under control through sensible compensation schemes, the client will never know.

    There is a clear alternative: fee-based investment professionals who offer a comprehensive spectrum of financial advice, clear answers to your questions, well-diversified portfolio management, minimal conflicts of interest, zero hidden fees, and reasonable asset-based fees.

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