Here’s when your financial planner’s advice needs a second opinion


Financial advisers often compare themselves to doctors. Like physicians, they provide specialized expertise to deal with complex problems. There’s a big difference: When patients face a serious health diagnosis, they often seek a second opinion.

But when clients hear their advisor’s recommendations for their financial future, they rarely consider getting a second opinion from another advisor. Should they?

Getting a second opinion when you are struggling with the possibility of a life-changing illness is routine. Rather than taking it personally, medical specialists tend to understand the desire of patients to seek the advice of another expert and even encourage them to do so.

Advisors, on the other hand, are not used to clients saying, “Thank you for your advice. Now, I’ll see what one of your competitors thinks about it.

H. Kent Baker, a college professor of finance at American University, considers second opinions appropriate for clients in certain circumstances.

“Counseling is an imperfect profession,” he said. “It’s a combination of art and science. So if I didn’t hesitate to go to another doctor for a second opinion on my physical health, I can see how that might make sense for my financial health.

He cites three interrelated factors that clients should consider when considering whether to consult another advisor in order to make informed financial decisions:

1. Confidence level: If the advisor consistently acts in a trustworthy manner, there may be less uncertainty about accepting a high-stakes recommendation.

2. Duration of the relationship: If you have worked successfully with a counselor for many years, the long-standing relationship can in itself help you feel more confident to stick to the plan.

3. Balance sheet: It’s reassuring when your advisor has given you careful and timely recommendations each time. More telling, it’s heartwarming when a counselor shows fallibility, admits it, and shares a lesson learned.

Baker adds that counselors, like the rest of us, have biases. If a client suspects that their financial planner‘s biases are interfering with clear advice, a second opinion can be helpful.

Another red flag is if an advisor applies some general rules of thumb when developing your financial plan without tailoring it to suit your unique situation, says Baker. You want someone who thinks about your specific needs, risk tolerance, and other priorities rather than taking a cookie-cutter approach.

One of the most common reasons clients seek a second opinion (or leave their current advisor) is dissatisfaction with the performance of the portfolio. They can assume that if only they picked an advisor with a warmer hand to pick stocks, they would generate higher returns.

Ironically, this is probably the worst reason to meet with another advisor. It’s easy for someone to brag about their prowess and proprietary investment methodology (“I don’t fall for all those advisers looking at the wrong things when building a portfolio”), but no one can guarantee that the market will beat back.

A more compelling reason to think about a second opinion is when you are going through a major life change, such as a divorce, career upheaval, or retirement.

“When people come to me for a second opinion, it’s often motivated by a larger life event,” said Derek Tharp, a certified financial planner in Portland, Me. “They’re like, ‘Things are changing, so I might need some new advice. ‘”

The logistics for getting a second opinion are straightforward. Many advisors offer free introductory meetings where they will review an investor’s current strategy and share their perspective.

“You might find that your [original] advising was fine, ”Tharp said. “But you have to be careful. You can get a sales pitch. The risk of a second opinion is that the advisor may suggest unnecessary tinkering. “

Following: Anyone can say, “I’m a financial planner. Here’s how to dig deeper to say what it really means.

Read also : What to watch out for – and watch out for – before giving your money to a financial advisor


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