By Anonymous Investment Professional, Guest Writer

My preference is anonymity, so let me give you a high-level background. I have spent the entirety of my career as an investing practitioner as well as learning by doing what I call “financial architecture design”. This is an approach to investment with the beneficiary’s return on investment, net of friction costs (taxes, liability, fees, etc.) being the ultimate focus. In addition to a Masters in Finance, I have allocated capital in virtually every asset class on behalf of myself and others. I have advised a small group of individuals and families stewarding over a billion dollars in assets in everything from generational planning, financial modeling, family office creation and design, charitable giving, and capital allocation. In some instances, experienced CPAs and lawyers call me to discuss ideas and brainstorm their other client’s situations.


What to Know About Financial Advisors

All that said, here is what I wish I could embed in every person who is, or will become, wealthy:


#1 Your Advisors Are All Salespeople

“Show me the incentive and I will show you the outcome.” – Charlie Munger

At the end of the day our advisors are all salespeople, even the good ones vetted on the WCI recommended financial advisor list. I will repeat it again, your advisors (CPA, lawyers, financial advisor, etc.) are ALL salespeople. All of them. Your CPA, your financial advisor, your lawyer, even someone like me when you ask me that one-off question at a dinner…we are or will be selling you something now or in the future. I know, I know, your _______ is different. They are not. They get a fee when you give them some form of your capital and their job is ultimately to convince you to do that (i.e., a salesperson). I am certain all YOUR friends are such because you are super enjoyable to be around. But what I see, in watching how advisors work, these advisors put themselves in your (and others like you) orbit. Your school, your church, your club, your pool, your supper club. Good actors and bad actors alike befriend you and ultimately would enjoy selling you their services. It is called relational sales and most medical practitioners are blind to it as it is not the practice of vendors or their own businesses. Hear me loud and clear, this is not always a bad thing. Just be aware. Be aware when evaluating their services. Be aware that this is a business relationship. Unless they have a differentiated business model, they receive a fee, usually a residual fee across the asset base or infrastructure created, for allocating your resources.


#2 You Need Them

“When a person with money meets a person with experience, the person with the experience ends up with the money and the person with the money ends up with the experience.” – Harvey Mackay

You need them. You need all the above. You need good advisors. You made your wealth doing X. It is highly unlikely that translates to you being able to grow and protect your wealth by managing your finances without help. The critical word above is a GOOD advisor. I know of a CPA that received a call from a doctor client. The doctor asked him some form of the following, “Hey CPA, my neighbor (who is also a surgeon) just met with his CPA and he is making some changes. They are doing the following….”. He then proceeded to rattle off a bunch of complex financial machinations that his CPA and financial advisor were laying out and asked “…Should I do the same thing? I make as much, if not more than him”. This CPA knew, without him being told, who designed the plan for the neighbor and said very simply that it was not necessary and what it was going to cost his neighbor to maintain all that financial engineering vs the benefit of same. Complexity is not always best or appropriate, so just because your advisor rattles off the minutiae of a complex trust system, or whatever, does not mean they are the best advisor for your situation. Always ask around, the more seasoned the advisor the better. They don’t typically need new business, so they don’t need to be aggressive in representing their potential value to a client.


#3 Ask the Right Questions

“If the only tool you have is a hammer, you tend to treat everything as if it were a nail.” – Abraham Maslow

Advisors are paid to think about you inside the box that is their craft and only when they are in front of you, because they do not think about you as much as YOU think about you. You must learn to ask the right questions…or you will never get their best advice. Advisors have hundreds of clients. One of the best advisors I know says to new clients the following, “I am a mirror. If you are aggressive, I can be aggressive. If you want to be passive, I can be passive.” This is a great and honest approach. If someone comes to a financial advisor and says, “Hey I read about a backdoor Roth IRA on The White Coat Investor. What do you think?” I would suspect most, if not all, advisors of any tenure have heard about it and probably done it. Now, why didn’t that advisor call YOU and advise YOU to implement it? In my experience, a small minority do this part and roll out new ideas across all the appropriate clientele. It is simply a function of the cost benefit of time. Ask yourself, how much time do doctors spend calling all their patients to suggest new health advice vs waiting for them to come in with the correct symptom or problem?

“Never miss a good chance to shut up.” – Will Rogers

So that with that, I would encourage you to

  1. Do your own homework when someone sells you something
  2. Get second opinions, especially as complexity is added, and
  3. Remember your advisor does not always have the complete picture (usually your fault) so ask the right questions.

Do you agree? What other critical details do you recommend people know about financial advisors? Comment below!

[Editor's Note: This article was submitted and approved according to our Guest Post Policy. We have no financial relationship.]