5 signs you are a pushover with your financial advisor

I usually pre-write my posts Sunday morning. Thus, in a completely unplanned companion post to Canadian Capitalist’s comments on this article about the investment industry not being empathic to a retired investor, I look at whether financial advisors are truly the enemy or whether we have seen the enemy and it is us.  Canadian Capitalist looks at this situation from the perspective of poor asset allocation. I address the larger point of whether we are pushovers to our financial advisors.

Most readers know that I use to be a lawyer (cue the jokes now…). If there is one professional that is more disrespected and despised right now than the lawyers, it is the financial/investment advisor (IA)- although its a close race. Good, bad or indifferent, the IA is being blamed for many of the ills of people’s portfolios. But, ultimately, having answered a lot of questions from friends on how to deal with their lawyers, your professional is yours to instruct. Even if you give crazy instructions (assume your instructions are for a legal act), the professional either has to carry it out or resign due to a fundamental disagreement with your strategy.

In other words, professionals work for you and not the other way around. The tail should not be wagging the dog. But some of us let our professionals, especially IA’s, get away with so much, holding their use of jargon and fast-talking circle-speak as signs of expertise.

Then we complain when we do poorly and blame it on the IA. But who’s really at fault? The person carrying out the instructions or the instruction giver?

Are we, in fact, pushovers with our IA’s?

Here are 5 signs that you may be a pushover:

1. You let the IA act without instructions. “You do what you think is best” gives your IA carte blanche to do anything they want which may include putting you in unsuitable products. Alternatively, the IA trades on your account without seeking instructions- a huge no-no- but you don’t say anything (whether you made money or not on an unauthorized trade is not the point; it would be like praising your 10 year old son for taking the car and driving it down the street without hitting anyone).
2. You never meet with your IA regularly. Yes, we are all busy but out of sight is out of mind and out of mind means they are inattentive to your account so they do not call you when the market or your life circumstances dictates some correction in your financial strategy.  Make yourself heard so you know you should be treated as an important client no matter how big or small your account is.
3. You never question their rationale for their advice. Little kids would make wonderful clients- they ask “why”, “what else is there to look at” and “why” (again and again) a lot. They make you justify their decision. If an IA says buy “ABC” don’t automatically assume that is the best product. Ask them how it fits into an overall strategy, whether there is an XYZ equivalent to ABC, how much they are making off the sale etc. Make them walk through their thought process so you know how they arrived at product (product is product; its the strategy that is important).
4. You do not want to be seen as pushy. Polite but poor is a better alternative. I use to chuckle when clients referred to me as “Mr.” especially when I knew they were much more successful in life than me. You are paying for your IA’s time, directly or indirectly, be assertive (but not abusive) if you must to get a point across.
5. You don’t call them on the fact they made a mistake. My IA has on occasion missed something which he catches or I catch (looking at your statements monthly in detail helps as a safeguard against unauthorized transactions or signs that your IA is indifferent to your account). It is usually something minor like he didn’t put my contribution into a money market fund when I asked him to. In every occasion, he corrects the error even if he pays out of it out of his own pocket (he gives me the interest lost). My IA and I have a good friend in common so there is more than just a professional relationship for him to keep. But the point remains, I do see the error and ask him to correct it. If you don’t, you are implicitly telling your IA that he/she can get away with larger errors (the whole slippery slope argument which lawyers are so famous for…).

There are good IA’s and bad IA’s (or really salespeople). But even the good ones can treat you poorly if you don’t stick up for yourself. The barrier to entry to become an IA is relatively low so don’t hold a large degree of deference to them (or any professional) and don’t let the size of your portfolio determine your importance to your IA. You are only negotiating against yourself if you think that way. Be proactive with your finances. It is your money after all.