Keep Your Investments Healthy – Know When to Get a Second Opinion

I have found that in the financial services industry, there are very specific issues that can hurt the client experience. There is too much jargon and not enough clarity. Relationships are often transactional and not built on trust. Many clients do not understand what they are paying or even how the advisor they are working with is being compensated.

That is what led me to write the book, “10 Common Mistakes Financial Advisors Make and Simple Ideas to Avoid Them.” I wrote it in hopes of raising the standards and thereby improving the overall client experience. My entire career has been built on trying to minimize the pain points that many clients experience in working with an advisor.

I spend a lot of time reassuring people I meet that they are not alone in their frustrations. A common question I get is “how do I know when it is time to seek a second opinion around my current investment approach?”

Typically, there are areas of discomfort that clients have ignored for a while. The first I have found is in the general language being used. It is critical that your advisor speak your language. When I talk to clients, I try to communicate in a language they understand, one they are familiar with based on their background, occupation, or life experience. My wife’s parents came to the U.S. from Cuba and only spoke Spanish. So, it was great. I didn’t speak Spanish and because of that never had an argument with them in all the years I was honored to know them. In fact, when we were at dinner with them my wife would speak in Spanish and then turn to me and speak English.

What is the lesson here? My wife spoke their language because that is what they understood and when she spoke to me, she spoke my language because that was the only way I would understand what was happening. When advisors sit at the table and talk to people, they tend to speak in industry jargon. This can create a stressful situation for some that are not well-versed in the subject of money. While they are trying to understand what is going on, the conversation is continuing. Or worse, in some instances they feel like they should already understand all the specifics. This is a shame and does not allow this important relationship to come from a point of mutual understanding and creates a disadvantage. This should never happen. It is the advisor’s responsibility to speak in a way that is understandable to the client.

There is a certain level of service and commitment people should expect. Given this, clients need to understand why it might be a good idea to assess the health of their investments and the relationship with their advisor. Speaking of expectations, probably one of the most basic that you should have is an understanding of how and where your money is being invested. Many people have told me “I don’t fully understand how my money is invested, the risk and or the fees associated with those investments.” It should not work that way. Great care and time should be taken to ensure you have a clear understanding of your investments and what may or may not be serving your goals.

When working with an advisor you should not only feel heard, but your specific concerns should be addressed. I have had many clients say to me “I told the advisor x,y,z and they just kind of blew it off and did what they wanted to do anyway.”  Allowing this to happen in any aspect of your life is problematic, but particularly when you are talking about your life savings.

My wife and I recently finished an addition on our house and as you can imagine, the process was not easy. When we started, we interviewed several architects. One of the first we met arrived and immediately began trying to convince me to do a barn style addition. I explained that we were looking for a different style, but he kept talking for 45 minutes about barns!

We didn’t select him and instead found an architect who listened to us and what we needed for our family. When we look at the completed addition to our home, she was able to bring our vision to life. This is how it should work with your advisor.

Given the fact that some people find themselves not listened to, no wonder I hear so many stories about people not quite understanding how their advisor is being paid. Recently, I met with a friend of a friend who had $2 million in investments and they were unclear about this. When I looked at her statement, I found a line that said “debit” and noted a $10,000 charge for the year. She was shocked. Know what the fee structure is for the financial advice you are getting.

Fundamentally, developing a plan to assess your financial health and the health of the relationship with your advisor is critical. In the end, you want to be working with someone that has the attitude of “let me help you make the decisions you would make if you had my knowledge, resources, experience and time” type of approach. When you find an advisor that takes that approach, the rest comes together more easily.

If all boxes are checked off in the above, look no further than corporate America for the last reason to consider a financial second opinion. The Securities and Exchange Commission requires public companies to audit their financials on a yearly basis. This is done to not only ensure compliance with accepted accounting practices, but to give investors and others “reasonable assurance” that a company’s financial statements are accurate. So, in the case of a personal investment, doing an audit of your current services allows you to have a degree of certainty that you are headed in the right direction.

In the end, the relationship with your financial advisor should be a partnership, and if that isn’t your experience, then a second opinion may be the way to go.

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