Late last month, sports agent Scott Boras was angry. According to USA Today, he’d just lost a $1.3 million grievance claim against perennial All Star outfielder Carlos Beltran of the New York Yankees. In the suit, Beltran fired his agent just before signing a whopping $45 million dollar contract. Without going into the details of the dispute, Beltran’s move effectively cut Boras out of the deal.
Is that you and your advisor? Are you about to fire your advisor because of their fees?
I don’t know the specifics of the baseball case, but I know how Boras feels.
There were times I was fired as an advisor and I felt like the clients hadn’t fairly done the math.
My job, I felt, was much like that of an “agent” for the families I worked with. New clients would come into the fold and I had to make them feel at home immediately. However, I had families that had already signed on the dotted line. As my practice grew, the goal became to show value to as many people as possible. In essence, I had to make sure that everyone was getting a little Joe-love.
It’s difficult juggling 200 families, but I don’t think you should cry for me. If she isn’t meeting with you, that’s a fine reason to fire your advisor. There are some great tools I used to stay on top of my client’s situation.
But still, some people would fire me. In some cases I deserved it. In others, the client was more worried about my fees than they were about how I was helping them.
Often when people talk about advisory fees they talk about how advisors are leeches that suck returns from your investments. Sometimes they’re right (check out this piece from the Securities and Exchange Commission on advisory fees).
In some ways, that’s true. In others, that’s a complete load of (using my mom’s word) hogwash.
I was lucky to work in the office of one of the best advisors in the nation. When he met with clients, he’d share two thoughts that’ve stuck with me. He said, “I help you two ways. Sometimes I put money in your pocket through wise investing. More often than not, I keep money from leaving your wallet by helping you avoid dumb mistakes.”
I love the second sentence he used. That, unsurprisingly, was the part that clients would choose to forget when they were performing the mental math on whether I was worth it or not.
Here are five ways I helped my clients “stay out of the mud.”
1) Ridiculously Good Tax Planning.
Without me, many clients would have had no tax strategy at all or would have had a poor one at best. Not only did I point out deductions they were eligible to receive, but I was able to help them put their accounts together in a tax-friendly manner. None of these showed up easily on the bottom line.
2) A Better Budget.
I helped many clients save FAR more than they thought they could. In some cases, they were able to double the amount they saved. While more money showed up in their accounts, they couldn’t easily say how much I’d added to the bottom line.
Often, I’d have to walk people through the cost of their addictions (great piece about this at the Cash Cow Couple blog). My job was often to hold up the mirror and show you the ugly truth.
3) Unraveling an Insurance Nightmare.
Many clients I met owned absolutely horrible insurance policies….or if they had the policy type correct, they had the wrong amount for the wrong reason.
4) Goal Milestone Planning.
By laying out clear markers for us to hit every year, clients were more likely to stick with the plan than suffer from financial ADD. Sticking with a plan is a huge reason why you meet your goals. That work, also, was difficult to quantify.
5) Steering Clear of Horrid Investment Ideas.
I was the guy that read the prospectus and the company financials so that you didn’t have to. I’d help you get more technical than a simple “throw some money in an index fund.” I’d talk you out of the “hot investment everyone’s talking about.” (See my list of the Top 5 Most Overrated Investment Types) When the market sank, I was the guy instituting the stop losses. I was the guy talking you off the ledge when you wanted to sell everything at the bottom.
Before you fire that advisor, ask yourself how many times she helped you stay out of the mud. If it’s never, then maybe the advisor deserves to go. But for many people I know, a good advisor is difficult to quantify.
Photos: angry kid: Gerry Thomasen; muddy: micadew
I think this is great to point out. Often times advisors are compared to the returns they provide and investing is only a small piece to someones overall financial picture. btw that mud pic looks like a spartan or tough mudder race
Done by Forty
I wonder if advisors would benefit from setting up a hypothetical “what if we did what you wanted” portfolio. Does such software exist, where you can enter in hypothetical purchases & tax scenarios? If not, do you know of any enterprising app developers?
It’d be helpful to show the delta to a worried/cheap client…