Broker Check

Who Calls The Plays?

| February 05, 2019
Share |

Imagine a football team with two quarterbacks on the field. In the huddle, both call the play. Which one do their teammates follow? Maybe the linemen follow one quarterback, and the running backs follow the other one. Sound like a disaster? It does to me, too.

I have seen a similar scenario with finances over my years in this business. Sometimes, a family doesn't want to put “all their eggs in one basket” so they believe they're being wise by having one financial Adviser invest one family member’s IRA, and another Adviser invest the other family member’s IRA. What may seem like diversity is probably not diversity at all, but it’s more likely it is duplication or “overlap” as it's known in investment terms.

For example, you have Adviser #1 invest in a moderate portfolio, holding 30% in a domestic large cap fund. Adviser #2 is also investing in a domestic large cap fund, and although they may be different funds they very likely could hold many of the same companies. That is not diversity, that's overlap.

What, to me, is even more dangerous is that Adviser #1 probably does not know what Adviser #2 is doing. Neither one has the complete picture. So, how can either of them help you reach your investment goals; goals that will likely need both investments to win the day? In other words, how can either help you reach one half of your goal?

I have worked in situations with many firms supposedly advising a family. What we've found is that none of the advisers--or even the family--had the slightest idea of what their true goal was, and how best to reach it.

My suggestion? Find one Adviser you trust. Tell them your entire story. Do not hide any investments from them. Allow them to carefully--and prayerfully--develop a plan to help you to reach your goals. Then follow it. Of course, discuss and ask questions, and seek a second opinion if you need to, but have only one quarterback on your Team.

Share |