“I Do Not Know What My Advisor Does”

I attended a cocktail party a short time ago and met with a senior executive that works at a technology firm. She and I engaged in a conversation about what we each do, and she shared a concern that her advisor was not able to give a clear enough idea of when she could retire. It turns out the advisor, as is common, was a referral from a family member and is in fact quite close to this family member. Because of the relationship, she has always been reticent to be too direct with her advisor.

After listening to her I asked her if her advisor was an asset manager or a financial planner or both. Her reply was “I really do not know”. I should not have been surprised, but I was. The reason why I was initially surprised is that the firm she works for has many large wealth management firms as clients, among other types of clients, and one would think employees of such a firm would have a decent understanding of the advisor landscape, preferably offered by her employer as industry training. But on the other hand, I still meet people from different parts of the financial services industry that simply were never taught about advisors, so it was not shocking.

I told her that she really needs to know what type of advisor she has, and to not be shy about asking her advisor directly what her advisor does and does not do, especially what the advisor does not do. I made the near-silly analogy that imagine if you could not differentiate between a dentist and a podiatrist, that’s nearly how bad it is not knowing the difference between an asset manager and a financial planner. I also shared with her that while she really needs to understand her advisor, the bigger fault lies with the advisor for not educating their client base on exactly what their profession is.

This latter issue of advisors not fully educating their clients on what they do and what they do not is unfortunately common. Most of the time it is not a malicious omission, rather many advisors assume their clients have a better understanding of their profession, especially considering when investors often ask precious few questions of an advisor during an initial interview or during intra-year reviews. The time has come for both investor and advisor to stop making any assumptions about the other and ensure there is complete understanding in what the advisor does, and if there is not complete clarity, speak up and ask.