Is it better for advisors to manage their own investments? Or is it better to have an outside view to avoid tunnel vision?
At 25, Tahnya Kristina (a pseudonym) started as an advisor for a Montreal bank. She managed affluent clients and was rewarded for her sound advice with a six-figure salary. But when it came to her own money, her management skills were abysmal.
Within four years as a CFP she found herself with no savings, zero assets and over $50,000 in debt. When the market tanked in 2008 and commissions dried up, she considered personal bankruptcy.
“For financial advisors, if you are too busy to manage your own money then somebody should be doing it; if you don’t have the time to manage your own money, or you don’t want to do it, you should have an advisor,” said Kristina, who is now debt free.
“I’ve seen financial advisors who have $30,000-$40,000 in cash in a bank account,” she says. “If they saw a client who did that they would never let that happen, but because they are too busy, or they don’t want to make a decision, or who knows what reason, they end up making mistakes with their own money.”
Kristina’s case is extreme, but it opens the question as to whether advisors should themselves seek financial advice. If an advisor is confident enough to manage his or her clients’ money, they should be responsible enough to take control of their own finances. But even a top-performing advisor may have good reasons to seek help: an outside expert perspective may be of benefit, it may free up time to deal with clients, or perhaps ceding control could free an advisor from compliance issues.
Koel Loyer, associate portfolio manager and senior associate with Stonegate Private Counsel in Toronto, tries to have things both ways: he manages his own portfolio but meets regularly with his partner where they reciprocally review each other’s investments.
“I manage my own portfolio, as does [my partner], but we’re fortunate as we’re a two-person team so we review our portfolios with each other so that we’re able to get each other’s take and opinion,” he says. “It’s like the best of both worlds: I’m managing my own but every six months I sit down with Joanne and review my stuff, and on hers we meet on it quarterly.”