Should You Work With Multiple Advisors? The Case for True Diversification

| January 14, 2025

Portfolio diversification, which means investing across asset classes, industries, and geographies, helps investors manage risk and avoid over concentration. For various reasons or to try to emulate the same benefits, people may apply this principle to financial advisors, engaging multiple professionals to help diversify perspectives and advice. In fact, according to InvestmentNews, 67% of wealthy Americans reportedly engage multiple advisors,1 including financial planners, investment advisors, wealth managers, and others. 

However, is having more than one financial advisor truly beneficial? Is it really a good way to diversify? We’ll explain why people may consider engaging multiple advisors, the potential drawbacks, and why we believe it does not deliver the same benefits as true diversified investing.

Can You Have Multiple Advisors?

Yes, you can have multiple advisors, but the question is whether it aligns with your goals and offers real value. People choose to engage multiple advisors for various reasons, including:

  • Specialized Expertise: If a single advisor has limited knowledge or experience, investors may engage a few advisors specializing in various areas, such as investments, real estate, or estate planning.
  • Hedging Bets: Similar to portfolio diversification, wealthy clients may want to avoid reliance on a single advisor, spreading out their assets to reduce risks such as underperformance or issues like bankruptcy.
  • Access to More Options: Different advisors may offer varying products, strategies, and opportunities unavailable through a single advisor.
  • Cost Management: Investors may consider combining various options to manage fees and stay within their budget. 
  • Trust and Loyalty: Clients may feel more confident spreading their assets across various advisors until they’ve built their trust or demonstrated their capabilities. Clients could also feel loyal to an advisor they’ve potentially outgrown but may continue the relationship out of a sense of obligation alongside new professionals.

Disadvantages to Consider When Working With Multiple Financial Advisors

While everyone’s situation and motivations may vary, we believe cohesive, centralized guidance is often more effective. Here are the potential disadvantages of having more than one advisor:

  • Conflicting Strategies: Clients may often have to navigate confusing, differing recommendations and inefficiencies that could impact their long-term success.
  • Lack of Accountability: When multiple advisors manage different portions of your portfolio, assigning responsibility or holding any advisor accountable for overall performance can be more difficult. 
  • Redundancies and Unintentional Overconcentration: Multiple advisors may recommend similar investments, leading to unintentional overconcentration in certain assets, sectors, or strategies, defeating the purpose of true diversification clients seek.
  • Lack of Synergy and Missed Opportunities: A single advisor with a holistic view of your portfolio can optimize investments, tax strategies, and estate planning to make them work together. Advisors working independently may lack synergy and miss opportunities, affecting your plan’s effectiveness.
  • Higher Costs: The management fees from each advisor or firm you work with can add up, especially if you have significant assets or financial complexity.
  • Inefficient Communication: Keeping track of multiple advisors can be time-consuming and inefficient, affecting financial clarity and progress toward your goals.
  • Dilution of Expertise: One advisor who is familiar with your goals, financial situation, and risk tolerance can make more informed recommendations than multiple advisors who may only have partial information. Additionally, multiple advisors may not effectively coordinate with your other professionals, such as a CPA or attorney, which could add further inefficiencies and stress.

Should I Have All My Investments with One Advisor? 

At Monarch, we believe managing your investments with a single firm has greater benefits than spreading them across multiple advisors, which can introduce several risks, costs, and disadvantages. Instead, clients can benefit more from centralized, coordinated guidance. Here are a few benefits of partnering with a single firm like Monarch:

  • Comprehensive View: We take inventory of your total financial picture, placing you at the center of planning. This helps ensure every aspect — not just some areas — is covered and reflects your priorities and specific life circumstances while considering planned and unplanned events.
  • Access to Diverse Perspectives: Our clients have access to and benefit from collective insights from our full team of carefully curated financial professionals, which helps ensure proactive communication, complete transparency, and unparalleled service.
  • Peace of Mind: Issues like bankruptcy and losing securities and cash were once a worry but the size and insurance coverage of our custodian, Charles Schwab, should help alleviate this concern.
  • Specialized Expertise: We offer advanced planning services beyond managing investments, including strategies that aim to help mitigate taxes, plan for heirs, protect assets, navigate a divorce or other life transition, or magnify charitable gifts. 
  • Fiduciary Commitment: ​​As fiduciaries, we’re dedicated to your success and delivering objective advice free from conflicts, so you can rest easy knowing we’re putting your best interests first.
  • Collaborative Teamwork: We serve as a central hub for your finances to keep every aspect aligned and efficient when coordinating with your extended team of professionals, such as attorneys and CPAs.

The disadvantages of having multiple advisors often outweigh the perceived benefits. Working with a single, trusted advisor can help simplify your financial life through a tailored, high-touch experience necessary for long-term success. Contact us to learn more about consolidating your financial plans and benefiting from a unified, comprehensive strategy that speaks to your unique circumstances and goals.

Sources:

1. InvestmentNews. Leo Almazora. “For most of America’s wealthiest, one advisor isn’t enough.” investmentnews.com. August 23, 2024. https://www.investmentnews.com/practice-management/for-most-of-americas-wealthiest-one-advisor-isnt-enough/256724#:~:text=Breaking%20down%20that%20advised%20cohort,respondents%20aged%2044%20and%20above.