Most investors with high net worth often hire more than one financial advisor to help manage their portfolios as a part of a smart diversification strategy to minimize investment risk.

Investors should wait until reaching $100,000 on their portfolio before hiring a second financial advisor

Diversification in Investment

We’ve often heart about the importance of diversification when investing in stocks, but this strategy should also be adopted when hiring a financial advisor, says Bill DeShurko, the head of Ohio-based advisory called the 401 Advisor.

DeShurko suggests choosing two advisors to look after your portfolio: one whose investment philosophy resonates with your goals and the other who has a completely different strategy than the first one. Let the former take care of 75 percent of your investible assets and leave the remaining 25 per cent under the advisor with opposing strategy.

However, this advice isn’t applicable to all investors. People who’re new to the world of investment should wait until reaching $100,000 on their portfolio before diversifying.

Different Investment Strategies

DeShurko says that he often uses two different strategies with his clients’ portfolios. He uses a dividend growth strategy for rollovers and a mutual fund strategy with 401(k) plans. Clients don’t require account minimum for either of the two strategies.

But investors are becoming more cautious about who to trust with their money due to a growing number of incidents where advisors have mishandled clients’ accounts or stolen money from them.

Jon Ulin, the manager of Florida-based Ulin & Co. Wealth Management, says that most people are concerned that they won’t even get the return ‘of’ their money, let alone a return ‘on’ their money whenever investment advisors are involved.

With this growing distrust among investors, it is becoming common to use the expertise of more than one advisor – in some cases people even hire as many as four advisors at a time to make sure that their investment is in the right hands.

Benefits of Choosing More than One Advisor

Different markets require different investment strategies which is why investors should having more than just one pair of expert eyes watching their portfolio.

There are plenty of benefits for choosing more than one advisor to look after your portfolio. Most fee-only advisors don’t see every type of investment. So if you’re someone who’s looking to diversify into private REITS, annuities, life insurance and other commissioned products, consider hiring a second advisor who specializes in these investments.

Conversely, investors who have hired commissioned insurance agents or brokers should also look for another certified financial planner who has specialization in the areas of retirement and financial planning.

HAGIN Investment Management CEO, Patrick Morris says that investors can even choose one advisor who focuses on private equity and another one who manages investment for publicly traded equity.

A differentiation strategy can give you better results over the long run, according to portfolio manager Ron McCoy, who works at the LOWS fund. He says that different markets require different investment strategies which is why investors should having more than just one pair of expert eyes watching their portfolio.

Having a few different advisors can also lower the risk of wiping out your savings completely in case of the fund managers is doing unscrupulous things with your money. McCoy says that it is also helpful to get the second option of another expert before buying a stock or shaking up your portfolio.

Approach a few different advisors for their expertise and compare their advice with one another to see what makes sense the most. McCoy warns investors to stay away from advisors who claim to have answers to everything, because even the most experiences folks in the industry don’t have all the answers.

Risks of Diversification

The law of diminishing returns also applies to your investment portfolio if hire too many professionals to manage your money. In case of inefficient communication between your advisors, there is a heightened risk that they may start holding duplicate products which creates an imbalance in your portfolio.

If you choose to have multiple financial advisors, it’s important that you pick a lead auditor who can monitor other advisors’ performance through monthly or quarterly meetings. This will lower any risk or issues related to working with too many professionals and also help you maintain control over your portfolio.

Do you think it makes sense to have more than one financial advisor to monitor your investment portfolio?






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