Pete the Planner: Two-timing your financial advisers isn’t the way

Dear Pete,

I have two financial advisers. One manages about 70% of my investments, one manages about 20% of my investments, and I personally manage the remaining 10%. They don’t know about each other, but I do run each of their ideas by the other one without them knowing where the idea came from. This worked for a while, but now it seems like they always disagree with each other. I’m starting to get pretty frustrated by the whole thing. How shall I proceed?

—Michael, Zionsville

I’m not quite sure how you’ll feel about my tone this week, Michael, so please don’t let your perception of my tone cloud my message. You are in a no-win situation. You’re clearly not winning, your advisers are undoubtedly frustrated by you, and frankly I’m frustrated by this situation too. Your decision to structure your finances like this, albeit more common than you might imagine, is counterproductive to your goals, and it will yield bad, if not dangerous, results.

I promise I’m not pandering to the financial advisers out there by comparing them to medical professionals (they love that) but imagine deploying your strategy with physicians or pharmacists.

I’m by no means a pharmacy expert, but I’m pretty sure neglecting to inform one pharmacist of 30% to 70% of the other medicines you’re consuming might be a bad idea. Not only are you likely to face inefficiencies, but you’re just as likely to physically suffer from your choice.

I get it. Turning your entire financial fate over to a third party (or in your case a third and fourth party) is jarring. You’ve already thought about all the things that could go wrong, and those fears are worth a bit of your oxygen.

Your adviser could be a criminal. Your adviser could be incompetent. Your adviser could be wrong. Your adviser could be unethical.

These are all the reasons you’ve created the structure you’ve created. But here’s the thing—you’re actually ensuring they’re wrong, and you’re certainly putting them into a position of ignorance. And truth be told, you haven’t really decreased the chances of them being unethical or even a criminal.

I know you don’t think you’re putting your advisers in a bind, but you are. Additionally, they’ve likely sniffed-out your scheme, and they don’t trust you. That’s a weird one, right? They don’t trust you. You want reciprocal trust in your professional relationships.

The situation gets a bit better if you transparently read the advisers in on your plan. At that point they can factor-in your other assets into their plans for you. They may choose to charge you for this, as is their right. But the reality is you’ll likely get better results, even if they charge you.

You are the only person who currently knows all the pieces of your portfolio, yet somehow you’ve only assigned 10% of the assets to your management style. At the risk of sounding even harsher, the least qualified person has the most information and the least amount of money to manage. Like I said, this is the opposite of what you want.

Yes, you want your adviser(s) to be amazing adviser(s). But you would significantly improve both your outcomes and satisfaction if you spent some time reflecting on what it means to be an amazing client. And while I want to write something pithy like, “It’s better to have loved and lost, than to have never loved at all,” I won’t. There are so many amazing financial professionals out there; you should sincerely seek out and enjoy one. And while 70% plus 20% plus 10% equals one, you would benefit much more deeply from one.

No matter how you read my tone, please know I want the absolute best for you and your financial life, and furtive adviser diversification isn’t the way, the truth or the light. Even if you choose to start fresh with an entirely new financial adviser, you’ll be better for it. The reality is you’re dealing with a relationship, and relationships need light to grow.•

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Dunn is CEO of Your Money Line powered by Pete the Planner, an employee-benefit organization focused on solving employees’ financial challenges. Email your financial questions to askpete@petetheplanner.com.