Why Having More Than One Financial Advisor Manage Your Investments is a Bad Idea

By Dan Solin

Here’s a question I often get asked: Should I hire more than one advisor to maximize my investments?

My answer is a resounding “no.”

Here’s why.

Different investment philosophies

An “evidence-based” advisor will invest your money by making decisions based on rigorous research and empirical evidence rather than relying on speculation, stock picking, or market timing.

They prioritize long-term strategies and diversification based on data-driven insights to minimize unnecessary risks and maximize returns.

Their approach involves using historical data and academic research to inform investment decisions and create portfolios aligned with your financial goals and risk tolerance.

The evidence-based approach emphasizes a disciplined, rational investment strategy grounded in robust empirical evidence.

Evidence-based advisors favor low-fee index and exchange-traded funds to ensure high costs don’t impair returns.

Other advisors believe they can time the market and pick stock “winners .” They may recommend investments in alternative funds, like hedge funds, private equity funds, venture capital funds, and real estate investment trusts (REITs).

Adopt one investment philosophy

When all investments align with a single philosophy, the overall strategy is cohesive and focused.

This approach allows for better risk management and portfolio diversification based on a unified set of principles.

A consistent investment philosophy simplifies decision-making and reduces the likelihood of conflicting strategies that could lead to an imbalanced portfolio.

Having one investment philosophy promotes clarity, consistency, and a disciplined approach to investing.

Inefficiency

Financial planning requires a coordinated approach to harmonize investments, taxes, estate planning, and retirement savings. Multiple advisors may not collaborate (because each one hopes to capture the balance of your business), leading to gaps in your financial plan.

Instead of benefiting from a cohesive strategy, you may end up with disjointed accounts and duplicated services, which increases costs without adding value.

Communication issues

When multiple advisors manage your investments, it becomes harder to maintain clear communication. You might also run the risk of advisors investing in the same assets, causing an overlap that can expose your portfolio to greater risk than you intended.

Lack of accountability

When one advisor manages your entire portfolio, they’re accountable for your financial success. With multiple advisors, no single person is responsible for the whole picture, which dilutes accountability.

Each advisor only sees a portion of your financial life, potentially leading to fragmented advice and missed opportunities.

Difficulty measuring performance

With two or more advisors, assessing who is adding value becomes challenging. You’ll need to track the performance of each segment of your portfolio separately, which complicates your ability to measure success accurately.

Unnecessary complexity

Having one financial advisor simplifies your life by consolidating your financial advice, reporting, and decision-making processes.

Adding more advisors introduces unnecessary complexity into your financial life, leading to more paperwork, meetings, and time spent managing the managers.

Reduced trust

A long-term relationship with one advisor lets them learn about your unique financial situation, goals, and preferences.

When you work with multiple advisors, you reduce the opportunity to build trust and rapport.

The absence of a single, dedicated advisor who understands the nuances of your financial life can limit the effectiveness of your planning over time.

Final thoughts

While having more than one financial advisor might seem like an excellent way to cover all your bases, it often leads to more problems.

Lack of coordination, higher costs, conflicting advice, and complexity can hinder your ability to achieve your financial goals.

Consolidating your investments with one trusted advisor is usually the best strategy for ensuring your financial plan is cohesive, cost-effective, and tailored to your needs, with this caveat:

You should carefully research before selecting an advisor (or advisory firm) to manage your portfolio.

Consider their qualifications, experience in the industry, and whether they have a fiduciary duty to act in your best interest.? Registered investment advisors (RIAs) have the highest fiduciary duty to their clients.

Highly respected qualifications include Certified Public Accountant (CPA), Chartered Financial Analyst (CFA), and Certified Financial Planner (CFP).? If you are considering an RIA who is also a CPA, check to see if they hold the Personal Financial Specialist (PFS?) certification. ????

To check an RIA's disciplinary history, visit the Investment Adviser Public Disclosure (IAPD) website , which is maintained by the U.S. Securities and Exchange Commission (SEC).

On the IAPD website, you can search for a specific RIA firm or individual advisor and access their registration details, including any disciplinary history, regulatory actions, or customer complaints.

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Dan Solin is the New York Times bestselling author of the Smartest series of investing books. He is the founder and President of Evidence Based Advisor Marketing, a digital marketing firm for financial advisors. Visit his website: https://danielsolin.com/