What Every Client Missed
The Crucial Question to Ask Your Financial Advisor (That Isn't About Returns)
I was a wealth manager for more than 36 years. Clients asked lots of questions about my practice. They inquired about my firm’s money management team and process, ability to run complex financial projections, compliance record, tax-saving strategies, and estate-planning expertise.
They never inquired about what money meant to me. Did my beliefs align with their beliefs?
Wealth managers who believe money represents success, security, and power often give well-intentioned advice that leads you astray. (I use the terms wealth manager, financial advisor, and money manager interchangeably.)
They may invest your money in an equity-heavy portfolio, subjecting you to market volatility that makes you queasy. They are likely to advise you to pursue the most financially lucrative career option, regardless of long hours or lack of meaning. Perhaps they encourage you to hold onto money you can easily afford to spend, depriving you of joyful moments with family and friends.
Effective wealth managers understand that a successful client relationship is one where you are empowered to use your money to create the life you desire without placing yourself in undue financial peril. They help you fund your priorities, understand the cost of your choices, and offer context around big financial decisions.
An effective financial advisor can offer useful guidance in situations like these:
I was offered a job that would double my income. It would require me to work 60 hours a week and travel 50% of the time. Are the financial benefits worth the sacrifice of being away from my family?
My spouse is fighting cancer. What’s the impact on our quality of life if I retire two years early?
I just received an unexpected six-figure bonus. How will it impact my family if I use the money to purchase a sports car instead of saving it for our financial future?
I always wanted to take my family on an African safari. It’s expensive. Can I stop contributing to my 401(k) for the next 2 years, use the money to pay for the safari, and still retire at 65?
I want to work for a charity serving the homeless. It means a 50% pay cut. Can I make that work for me and my family?
How do you discover your wealth manager’s money mindset? You ask them. Ideally, outside the office. Maybe you meet them for lunch, dinner or a cup of coffee. Most people love talking about themselves. Here are some questions to get you started.
I can tell you’re good at what you do. I’m sure you had lots of career choices. I’m curious—why did you choose to become a financial advisor?
In your own life, how do you balance the need to save for the future with the desire to enjoy life now?
I love hearing stories about how you helped other people because it helps me understand how you might guide me. Can you share with me 2 or 3 client success stories from the past year?
Cultivate a conversation that helps you understand this advisor’s motivation. If all they talk about is saving money on your taxes and improving your investment returns, that’s a warning sign. What I’m listening for, in response to these questions, is the human factor. Is this someone with a desire to help clients educate their kids, live comfortably, retire comfortably, and maintain independence in old age? Or do they seem unduly focused on dollars and cents?
This is a conversation you want to keep having, because the world changes, your priorities change, and your financial advisor’s outlook also may change. Make time in your busy life to continue this conversation regularly. And don’t forget to ask once in a while, “Do I do anything as a client that’s not particularly productive?” The answer might surprise you!
Having a wealth manager whose beliefs around money parallel your own makes the relationship more effective, more enjoyable, and personally fulfilling. Finding the right fit is not easy and it is so worth the effort.
Until our next conversation,
David
Small Steps & Worthy Questions
Please don’t begrudge your money manager fair compensation. Sure, there are bad apples, as there are in every profession. But many hardworking managers earn every penny as they provide their clients exceptional value.
What does your financial advisor need to know about you that you have not yet told him or her?
If you don’t have an advisor, network with friends and colleagues to find 2 or 3 who might be a good fit for you. Interview each of them and choose one.
If you don’t feel that your values align with your money manager’s, find someone else who will help you use the tool of money more effectively as you strive to build a fulfilling life.
Please let me know if you decide to ask some of these questions of your financial manager, and whether they were helpful. Consider talking to friends or family members about whether they discuss personal priorities in detail with their managers.