Spouse. Kids. Financial Advisor. The Most Important People in Your Life (in that Order)
9 Reasons Why Having the Wrong Financial Advisor Can Bring to Ruin Your Lifetime of Hard Work
A lot can go wrong.
You or someone in your family can suffer costly and traumatic health problems. Your business could fail. Your real estate investment could get burned in a fire. One of your kids could have substance abuse problems. Your identity could get stolen. Irreplaceable valuables could get stolen from your home.
All that and so much more can happen even if you do have a financial advisor.
Imagine going through an event like those without one.
As someone with ultra-high net worth, you are sitting on eight, nine, or ten figures of wealth. Who you choose as your financial advisor is one of the biggest financial, practical, and even emotional decisions you will ever make.
Why is this true?
Let’s take a look at some of the things that can go wrong if you choose the wrong advisor, or even worse, have none at all. After these first five, we’ll show you four more calamities that can happen after you die. Your advisor will still be working for your interests, even after you’re gone.
Find out if Pillar Wealth Management is the Right Advisor for You
5 Things that Can Go Wrong While You Live – with the Wrong Financial Advisor
First, let’s look at what can happen while you are alive if you choose the wrong advisor. As you go through this list, you will see very quickly why choosing the right advisor is as much an emotional decision as it is a financial one.
1. Poor Returns from Too-Conservative Investments
A lot of high net worth investors got rattled by the Great Recession from 2007 to 2009. Many lost 30%, 40%, or even more of their total net worth in just a year or two. A similar trend occurred during the dotcom bust eight years earlier.
Unfortunately, emotions are terrible investment guides.
We have encountered numerous clients and potential clients who lost big in some previous bad bet, such as a hedge fund that failed to deliver on its vague but alluring promise. Many of them responded to those losses by swinging the pendulum too far in the other direction, and setting up ultra-conservative asset allocations.
Some people exited the stock market and never returned. Some have earned just 2-3% when they could have been earning three, four, or five times that – easily. The millions missed out on by many wealthy investors, because of fear and overly conservative investments, happened in part because they had no fiduciary, expert financial advisor working with them.
They thought, “I can handle it. I’m not losing 40% of my money again.”
Good goal. Wrong solution.
2. Blown Returns from Too-Aggressive Investments
When times are good, you often see friends and clients careen off the deep end in the other direction. 100% equities! Hedge funds. Angel investing. Aggressive growth. The market has gone up for ten years straight. It’s a bull market. Let’s keep buying more.
The higher the risk, the greater the potential for catastrophic loss.
Again, we have seen clients come to us having lost 70% to 80% of their total net worth because of terrible investment planning.
Would you feel some emotion if you had $30 million one year, and then woke up with just $7 million a couple years later after a market downturn you failed to plan for?
The stakes are that high when choosing your financial advisor.
That’s why astute, balanced investment advice by an experienced financial advisor, one who has experienced the euphoric market highs and weathered its lows, is one the smartest decisions you can make. To talk about the specifics of your situation and how Pillar Wealth Management may be of assistance, schedule a chat with CEO and co-founder Hutch Ashoo.
3. Poor Asset Allocation, Higher Risk, Lost Opportunities
Choosing the right asset allocation isn’t easy. You can’t just pick from a menu trending from “Aggressive Growth” to “Conservative” and consider your job done.
This is why we call it wealth management. Your asset allocation will not be fixed in stone. It will adapt as your financial realities and life situations change over time. What works when you’re 40 won’t work when you’re 50 or 60 or 70.
Goals and priorities change. Plans change. Family situations change.
Without an expert financial advisor who can create a customized plan that also adapts to these changes – as they happen, not five years later – you will very quickly fall into perilous waters.
4. No Reliable Process for Achieving Long Term Financial Security
The wrong financial advisor might ask you, without any context, “How would you describe your risk tolerance?” They might follow that with similarly context-free and mostly meaningless questions like “How would you feel if you were to lose 20% of your portfolio’s value?”
The right financial advisor will create a plan that relies on built-in safeguards to greatly reduce the likelihood of suffering unacceptable losses such as this.
All financial plans are not the same! Not even close.
Likewise, all financial advisors are not using the same basic methods and principles.
However, if there is a majority using similar processes, they are using processes based on Wall Street methods, Wall Street assumptions, and Wall Street values. These approaches generally serve the same goal – further enriching Wall Street.
Does your advisor have a detailed, data-backed plan that does everything possible to assure you of long term financial security and the fulfillment of all your greatest lifestyle dreams and desires?
The right advisor will have a process for achieving this. The wrong advisor will probably scratch their head when you demand a detailed explanation for how they will safeguard your wealth and preserve it for all your future plans and generational goals.
what our planning process entails, schedule a chat with CEO and co-founder Hutch Ashoo
5. Scaled Down Lifestyle with No Time to Make Up Losses
This is the ultimate cost of choosing the wrong financial advisor. It’s one of the greatest fears of nearly every ultra-high net worth family: Being forced to downsize. Having to cut back from deeply held plans and dreams.
Imagine being told by a sheepish 30-year old advisor who takes over your brokerage firm account when you’re 67 that it looks like your wealth may run out before you turn 85 unless you make some serious adjustments.
Imagine losing 70% of your wealth when you’re 60 because of an ill-advised investment plan and an “unexpected” recession. As if any of them have been expected. Now having insufficient time to recover those losses and still stop working when you had planned, you face a litany of choices – all of them distressing.
This is what can happen if you end up with the wrong financial advisor.
And the bad news is, that’s just while you’re living.
Find out if Pillar Wealth Management is the Right Advisor for You
4 Things that Can Go Wrong After You Die – with the Wrong Financial Advisor
Average people sometimes say they don’t care what happens after they die. But as part of the high net worth community, you know that’s not honest. When pressed on it – everyone cares what happens after they die – especially to the people they care about most.
The difference is, your wealth has put you in a position to make concrete plans that can continue bearing fruit decades after you’re gone. But with the wrong financial advisor, your best laid plans will fall far short of what you envisioned and desired for your wealth.
Here are four things in particular that can inflict great emotional stress on your heirs after you’re gone.
1. Higher Taxes Lost to the Government
Have you ever looked into the staggering amounts of money that can be saved through smart estate planning?
For ultra-high net worth families, the difference between what you might pay in higher taxes as a result of poor planning and what you might pay otherwise can reach tens or even hundreds of millions.
Yes – this is that serious.
2. No Access to Your Records
With poor planning, your heirs can be locked out of your financial records and have to jump through time-wasting hoops just to regain them. Without proper planning, you’ll be saddling your heirs with stress as they try to pick up the pieces.
Meanwhile, they’ll likely have to spend some of your remaining funds paying specialists to help them – costs that could have been avoided with the help of a good financial advisor.
3. Wasting Time in Court
If you don’t properly plan in advance for what will happen to your estate, and who will direct that process, your heirs will waste many hours slogging through a court process they have little control of. And they’ll pay money to get through it, and likely come out with less money than they should have when the process finally wraps up.
Now is the time to establish the plans that will give control of your estate to the proper individuals when the time comes.
The wrong financial advisor might figure you’re taking care of this sort of thing on your own, and they’ll just keep looking at your investment performance, considering that to be the primary focus of their job.
4. The Wrong Beneficiaries Get Part of Your Estate
Maybe you did create an estate plan. Ten years ago. But what has happened since then? What if one of your children has since gotten divorced and lost custody of the kids, but your original estate plan allocated large portions of your estate to those grandkids, perhaps for college.
Do you still want to pay for college for grandkids no long in your life?
What about a sibling who dies early, or, heaven forbid, a divorce of your own marriage? What if the financial prosperity of one segment of your family greatly increases? Will that change how you allocate your wealth after you die?
The wrong financial advisor may employ a ‘set it and forget’ checklist approach to their job. We did the estate plan, so that’s off the list. Next.
Wrong. Your estate plan is never ‘done.’ Just like your investment planning process continually evolves while you’re alive, your estate plan must be continually adjusted as well.
Who Determines the Growth, Security, and Preservation of Your Wealth?
It’s not you. It’s not your spouse. The person with the greatest influence on how much of your wealth stays in your family before and after you’re gone is your financial advisor. If you don’t have an advisor, you are setting yourself up to lose millions.
The person with the greatest influence on how your wealth grows and prolongs itself throughout your lifetime is your financial advisor.
Unless you already are an investment planning expert (and very few are – you have other things to do with your time), you probably don’t have the skills to do this as well as it needs to be done if you expect to achieve and exceed all your short and long term financial and lifestyle goals.
Your financial advisor creates your investment plan.
Your financial advisor manages your portfolio.
Your financial advisor preserves and prolongs your wealth.
Your financial advisor ensures your heirs are treated according to your wishes.
If you don’t have one, or if you have the wrong one, none of these things will happen to the degree that they should.
Stress will increase.
Money that shouldn’t have been lost will be lost, wasted, and taxed.
Time will be wasted on things that should have been taken care of.
Investment growth that should have happened will fall short.
Financial serenity that should have been enjoyed all the way through to the end will remain an unfulfilled dream.
Spouse. Kids. Financial advisor.
That’s the order of the three most important people in your life.
Everyone knows what can go wrong if you choose the wrong spouse. And everyone knows what happens if your kids don’t turn out as you hoped.
Now that you’ve read this, hopefully you realize the stakes of choosing the wrong financial advisor.
To see if Pillar Wealth Management is the ultra-high net worth financial advisory firm that’s right for you,