If you don’t trust your investment advisor with your complete financial picture, and a bad trade devastates your portfolio, who’s to blame? You.
If you don’t trust your insurance agent with your complete financial picture, and a policy doesn’t address your true long-term needs, who’s to blame? You.
If you don’t trust your accountant with your complete financial picture, and the IRS hits you with an audit, who’s to blame? You.
You get the point. Anyone who’s ever talked with me has heard me bemoan the fact that people are not forthright with their advisors. People have lots of reasons why they don’t trust their advisors with critical information, but they all wonder why their advisors “didn’t warn them” about this or that potential problem.
Well, how could they? If you don’t trust your financial advisors with all relevant information, then you can’t complain about not being represented fairly.
What You’re Not Telling Them—and Why.
A recent article details some of the information clients withhold from their advisors. Among the findings:
The numbers add up to nearly 200%, because clients withhold more than one key issue—but any of these issues can sabotage an advisor’s recommendations if they’re not disclosed.
So why don’t you trust your financial advisors? They’re usually old friends, or were referred by people you trust. Why not tell them everything?
Here are a few reasons I’ve heard:
- “I don’t want to hear a sales pitch.” Naturally, advisors who sell financial products are predisposed to turning advice into sales recommendations. But if you tell them everything, at least their pitch will be better suited for your situation.
- “It’s embarrassing.” I get it—you don’t want to tell a relative stranger about your prostate condition or the money you loaned to your reckless brother-in-law. But your advisor’s a professional. He’s heard worse.
- “I don’t want to look stupid.” It’s hard to admit you don’t understand what an advisor’s saying—or that you went and did the exact opposite of what he recommended. But the longer you let it go, the worse the situation gets.
- “I can’t remember what I told my other advisors.” This is just silly. If you tell each of your advisors everything about your finances—and keep a written record—then you don’t need to remember.
How to Straighten Out the Mess
Short of gathering your investment advisor, estate planner, insurance agent and accountant in the same room and dumping your files on them, how can you make sure you’re getting the best advice from each of them based on complete financial disclosure?
Find an objective, fee-based advisor who is not your friend.
This advisor will not try to sell you anything, because he has nothing to sell. He will not care about your embarrassing health issues, investment mistakes or lack of financial acumen, because he isn’t your golfing buddy. He will not worry about angering your other advisors, because you are paying him to extract their best performance—and he doesn’t want to be their friends, either.
I founded LifeAuditors to be exactly this kind of advisor.
And I insist on complete financial disclosure from my clients. In fact, I have no qualms about firing you if I establish that you have not fully disclosed all information. Sound cold, heartless and just rotten? Maybe, but it’s the only way I can guarantee you the best financial advice. Because I am not your friend.
Paul Katz doesn’t care if you like him. As the founder of LifeAuditors, he stays objective to help you reach your financial goals, and sells no financial services of any kind. His advice is completely impartial.