Managing your money is serious business, and deciding whether to entrust all your assets to a single financial advisor or spread them among multiple professionals is a question that deserves careful consideration. I’ve spent considerable time researching this topic and wanted to share what I’ve learned to help you make the best decision for your financial future.
The Big Question: One Advisor or Many?
So, should you put all your eggs in one basket when it comes to financial advice? The answer isn’t as straightforward as you might hope—it depends on several factors unique to your situation.
Find out the good and bad points of each method so you can choose the best one for your money situation.
Benefits of Sticking With One Financial Advisor
1. Cost Efficiency
One great reason to work with a single financial advisor is that it’s usually cheaper. When you combine your assets with one advisor, you may be able to get tiered pricing or breakpoint discounts on asset under management (AUM) fees. Most advisors charge between 1% and 2% of the amount of your investment, and these percentages often go down as your investment amount goes up.
If you don’t have a lot of money, investing with a lot of different advisors can quickly get expensive and hurt your returns.
2. Simplified Management and Communication
Having just one point of contact for all your financial matters makes life SO much easier! You won’t need to repeat information to multiple people or coordinate between different advisors This streamlining means
- Less paperwork to manage
- Fewer meetings to schedule
- Easier tracking of your overall financial picture
- More efficient handling of administrative tasks
3. Consistent, Holistic Financial Strategy
When one advisor oversees everything from your investments and retirement planning to your estate planning and tax strategies, they can create a more integrated approach. This comprehensive view ensures consistency across different aspects of your finances.
For example, a single advisor can coordinate tax-loss harvesting or asset allocation strategies across all your accounts to maximize efficiency. They can also make sure that decisions in one area don’t negatively impact others.
4. Ideal for Smaller Portfolios
One financial advisor is usually enough if you’re new to investing or have a pretty simple financial situation. Most people who want to invest would start with a 401(k) plan for retirement and some student loans to pay off. One advisor can easily take care of your needs in this case until your portfolio gets more complicated.
Drawbacks of Using Only One Advisor
1. Limited Expertise
No advisor is an expert in everything. While your financial advisor might excel at investment management, they may not have deep knowledge in specialized areas like complex estate planning or international tax law.
This limitation could mean you’re not getting the best possible advice in every financial area that matters to you.
2. Advisor Bias
Every financial advisor has their own approach and biases. Some are naturally risk-averse and favor traditional investments, while others might be more aggressive. By relying on just one advisor, you’re essentially accepting their perspective and potential biases as your only guidance.
There’s also the risk that a commission-based advisor might push particular investments that benefit them financially, which may not always align with your best interests.
3. Not Ideal for Complex Portfolios
High-net-worth individuals with diverse assets like real estate, art, collectibles, international investments, and business interests may find that a single advisor lacks the breadth of expertise needed to manage everything effectively.
Complex financial situations often benefit from specialized knowledge in multiple areas that one person simply can’t provide.
Advantages of Working With Multiple Financial Advisors
1. Access to Specialized Expertise
Different advisors bring different strengths to the table. By hiring multiple specialists, you can benefit from deep expertise in specific areas like:
- Tax management
- Real estate investing
- Estate planning
- Investment management
- International finance
This approach is particularly valuable for high-net-worth individuals with complex financial situations.
2. Diverse Perspectives and Strategies
Multiple advisors expose you to different approaches, strategies, and market insights. This diversity can help you identify opportunities you might otherwise miss and potentially enhance your returns.
You can also compare advice from different sources and select the strategies that make the most sense for your situation.
3. Reduced Risk Through Diversification
Just as diversifying your investments reduces risk, working with multiple advisors can protect you from being overly dependent on one person’s judgment or approach. If one advisor underperforms or makes a mistake, it won’t affect your entire portfolio.
Disadvantages of Multiple Financial Advisors
1. Higher Costs
This is probably the biggest drawback—hiring multiple financial advisors will almost certainly cost you more. Each advisor will charge their own fees, which can significantly reduce your overall returns.
Before deciding to work with multiple advisors, make sure the expected benefits outweigh the additional costs.
2. Coordination Challenges
Managing a team of advisors requires considerable time and effort. You’ll need to:
- Schedule multiple meetings
- Track various investment strategies
- Ensure advisors aren’t working at cross-purposes
- Manage potential conflicts or overlap in recommendations
This complexity can be overwhelming, especially if you’re busy with professional and personal commitments.
3. Potential for Confusion and Conflicting Advice
Different advisors may suggest contradictory strategies or approaches. This conflicting advice can create confusion and make it difficult for you to determine the best course of action.
Additionally, advisors might not work well together, potentially undermining each other to gain your approval or favor.
How to Decide What’s Right for You
So how do you figure out whether one advisor or multiple is best for your situation? Here are some practical considerations:
1. Assess Your Portfolio Size and Complexity
The size and complexity of your investment portfolio should heavily influence your decision. As a general rule:
| Portfolio Size/Complexity | Recommendation |
|---|---|
| Small to medium, straightforward investments | Single advisor is usually sufficient |
| Large, diverse assets across multiple categories | Multiple specialized advisors may be beneficial |
| Medium with one or two complex elements | Primary advisor with occasional specialist consultations |
2. Evaluate Advisor Competence
If you’re considering consolidating with one advisor, thoroughly assess their:
- Credentials and certifications: Look for designations like Certified Financial Planner (CFP®), Chartered Financial Analyst (CFA®), or Chartered Financial Consultant (ChFC®)
- Fiduciary status: Ensure they’re legally obligated to act in your best interest
- Experience and specialization: Verify their expertise aligns with your financial needs
- Communication style: Confirm they communicate clearly and are accessible when needed
- Fee structure: Understand exactly how they charge (AUM fees, hourly rates, flat fees, commissions)
3. Consider Alternative Models
There are several approaches between the extremes of “one advisor” and “multiple independent advisors”:
- Hybrid models: Work with a primary human advisor who leverages technology (like robo-advisors) for routine tasks
- Team approach: Choose a firm with multiple specialists who work together under one roof
- Primary advisor plus specialists: Maintain one main advisor who coordinates with specialists for specific needs
4. Factor in Your Time and Interest
Be honest about how much time and energy you’re willing to invest in managing your finances:
- Limited time/interest: A single advisor or team approach may be preferable
- Moderate time/interest: Primary advisor with occasional specialist consultations
- Significant time/interest: You might manage some aspects yourself and use multiple specialists for others
My Personal Take
After researching this topic extensively, I’ve come to believe there’s no one-size-fits-all answer. However, I think most people benefit from starting with a single, well-qualified financial advisor who operates as a fiduciary. As your wealth grows and your financial situation becomes more complex, you can gradually incorporate specialists for specific needs.
What’s most important is finding advisors you trust, who communicate well, and who clearly understand your financial goals. Whether that’s one professional or a carefully selected team depends on your unique circumstances.
Key Takeaways
- Single advisor benefits: Lower costs, simplified management, holistic strategy, ideal for smaller portfolios
- Single advisor drawbacks: Limited expertise, potential bias, may not be sufficient for complex portfolios
- Multiple advisor benefits: Specialized expertise, diverse perspectives, reduced risk
- Multiple advisor drawbacks: Higher costs, coordination challenges, potential conflicts
- Decision factors: Portfolio size/complexity, advisor qualifications, your time/interest level
The bottom line? Assess your financial needs honestly, consider your budget for advisory services, and choose the approach that gives you the best combination of expertise, convenience, and value for your specific situation.
Remember, whatever you decide isn’t permanent. You can always start with one advisor and add specialists as needed, or consolidate multiple advisors if managing them becomes too cumbersome.
What’s been your experience with financial advisors? Have you found that one is enough, or do you prefer working with multiple professionals? I’d love to hear your thoughts in the comments!
Advisor Diversification Leads to Disjointed Investment Strategy
When it comes to investing, “don’t put all your eggs in one basket” has become a cliché, so it’s not a surprise that this saying is often used to guide financial advisor decisions. Unfortunately, advisor diversification doesn’t necessarily have the same benefits as portfolio diversification. ”.
Here are a few risks that come with using multiple advisors…
One advisor can see the whole picture while multiple advisors might be taking different approaches. This may lead to asset allocation that differs from your original risk tolerance and goals. Even worse, it can lead to concentration risk, an overall undiversified portfolio, and eventually, potential losses of assets. Sometimes, one advisor will sell an investment while the other adds it, which could mean that you lose money on both decisions. Eventually, this lack of cohesion could lead to you falling short of your retirement goals.
Offset investment gains and minimize your tax bill by working with an advisor with thorough tax knowledge. When you hire multiple advisors, you risk one of them having little tax knowledge and another having a lot of it. If you have two advisors, one might work on tax planning while the other doesn’t know what the other is doing. One advisor might have a lot of taxable gains, while another might have the same amount in unrealized losses. This creates an imbalance that leads to a bigger tax bill overall.
At Storen Financial, we eliminate avoidable tax consequences since your tax accountant and your investment manager are one and the same. This is a distinct benefit in working with us for both your investment and tax needs, since we marry the investment strategy to your current tax situation. This relationship enables us to avoid inconsistency in your portfolio that could otherwise lead to major tax hits down the road.
The more money in your AUM, the more likelihood there is for your advisor to offer breakpoint discounts. In other words, the more you invest, the less advisor fees you’ll have to pay. When you use multiple advisors, you risk losing out on these discounts and thereby losing potential investment results.
When you have a single advisor, you can be assured they’re managing all your assets in one place. Otherwise, you risk having to constantly check that both or all are following your investment strategy and not deviating from your goals. Handing over the workload to one qualified professional can relieve the stress of heeding conflicting advice and making sure both advisors are continually on the same page.
When Should I Hire a Financial Advisor?
FAQ
Should you give all your money to one financial advisor?
Your overall goals and financial situation can help you decide if you should work with more than one advisor. One advisor might be enough for you if you’re new to investing and haven’t built up a big net worth yet.
What is the 80/20 rule for financial advisors?
Better investment choices: According to the Pareto Investment Principle, 80% of investment returns can be expected from 20% of investments. Focusing your investment choices on the investments that are most likely to give you the best returns may help you save more money faster.
What is a red flag for a financial advisor?
A financial advisor should help you make informed decisions, but there are warning signs of a bad financial advisor that could indicate when they are doing otherwise. These signs generally include pushing unsuitable products, lacking transparency about fees, or being unresponsive to your questions or concerns.
How much money should you have to have a financial advisor?
If you are looking for investment management you may find many advisors have minimums of $500k or more. If you’re looking for a financial plan, there are fee only planners who will charge you either based on your net worth or a flat fee (typically around $3 – $6k).
Should you hire a financial advisor?
Hiring a financial advisor is one of the best ways to achieve your goals, whether they’re as pragmatic as establishing a plan to save up to buy a home, as lofty as becoming an accredited investor or as fun and frivolous (but well deserved!) as a luxurious trip to Disney World.
Do I need More than one financial advisor?
The question of whether you need more than one advisor to achieve your financial goals will depend on several factors. The main reason to find more than one financial advisor is if your current financial advisor is not meeting all of your needs. Your additional financial advisor should fill in the gaps of your current financial advisor.
Should you work with a single firm or multiple advisors?
Whether you work with a single firm or several independent advisors, it’s important to make sure that everyone is on the same page about your situation, goals and risk tolerance. Your advisors can coordinate – with your permission – to make sure every transaction is done in the most beneficial way.
Should you have multiple perspectives on your financial advice?
Having multiple perspectives on your side means you’re less likely to succumb to the consequences of low-quality financial advice; at least one other advisor is always present to point out red flags in other advisors’ advice. In other words, your financial advisors are the steel, and their interaction makes all of them collectively “sharper.”
How many financial advisors do I Need?
Based on your requirements, the service matches you with 1-3 advisors suited to meet your financial needs and goals. Should you put all your money with one financial advisor?
Why should you choose a single financial advisor?
By choosing a single financial advisor, you can not only consolidate all your financial information but can also keep a tab on your investments. It reduces errors and oversight and makes it easier for you to follow through with the professional’s advice. 3. Ideal for managing smaller investment portfolios: