IN THE business of investment advice, financial advisors build relationships based on trust, transparency and integrity. Clients take our advice in the belief that we have their best interests at heart. If we know we have made worthwhile recommendations, we should have no problem acting on those recommendations ourselves. We are a walking example of our brand, our business and our profession. How we manage our own money speaks volumes about how we will steward the
wealth of our clients.
Our clients value transparency. As leaders in wealth management, we should be comfortable being honest and direct with our clients about our personal financial goals and trade-offs. Our clients also value our leadership. It is important that we save and manage our personal wealth to lead our clients in the right direction with reasonable expectations. In other words, it is important that we take our own advice, that we invest alongside clients as partners. Knowing that we are partners gives my clients confidence in our relationship and builds trust.
As an advisor, I have the opportunity to invest my own money in a wide universe of investment options. Given this opportunity, the holdings of my personal portfolio speak volumes as to where I see opportunities for growth. If I am choosing an investment for my personal wealth, you can bet that investment is going to be very attractive.
Before recommending any investment, we have to commit to investing. Not every individual investment will work out perfectly. In instances where an investment has taken an unexpected turn, our clients know we recommended the investment with the best of intentions – the fact that we also have skin in the game provides clear evidence.
Speaking with clients about our personal financial situations will gain their trust and respect. I am transparent with my clients about how I chose the best financing option for my condo, where I buy my shoes and how I chose my car. I am constantly evaluating how my spending lines up with my goals, tracking every dollar I spend and considering what my most cost-conscious clients would have to say about the way I spend my money. The choices I make when spending my own money are in line with what I recommend to my clients if they ask for my opinion.
Along those same lines, the tax-saving strategies I recommend are the ones I apply to my personal finances. There is a lot of speculation on the effectiveness of tax-saving strategies, and people often ask me if the strategies we discuss are effective. The basic strategies I apply to my own money include maxing out my RRSP, investing within my TFSA and claiming every honest deduction on my tax return. In addition, I personally invest in flow-through shares, tithe 10% of my pre-tax income to my church, make charitable donations in-kind using appreciated securities, and invest tax-efficiently in my non-registered investment account. After executing these strategies personally, I can speak to my clients about my experience and the effect these strategies had on lowering my tax bill.
Planning ahead for my estate was another great experience. I completed this process with signed, up-to-date wills and power of attorney documents, which left me with peace of mind about what will transpire when I am no longer in control of my finances. My plans have been openly communicated with my executor and the beneficiaries of my estate, so there should be minimal surprises. My ability to speak about this experience has encouraged many of my clients who were reluctant to
engage in estate planning to start the process.
At the end of the day, the true test of trustworthy advice is: Would you take your own advice? I always want my answer to that question to be, “I already have.”