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6 Reasons to Consolidate Your Investments

Doug Garrison, CFP, MBA - Senior Wealth Advisor

We’ll be honest. This blog may appear self-serving. Seeming self-serving, however, isn’t a sufficient reason not to publish ideas that can help you out, whether you’re a client, a prospect, or a casual reader. So, hold on to any skepticism and read the rest.

It’s not unusual for investors to be gun-shy about handing over management of all their assets to a new financial advisor. One typical approach is to divide the pot of money between two or more managers and maybe keep a portion of the assets to be managed yourself. Manager diversification—who can be against that? Other investors want to see their advisors in a horse race—who’s going to get the best results over six months or two years?

Consider the following six reasons for consolidating your investments:

  1. You may save money. If you’re paying multiple advisors to manage your assets, chances are, with one advisor you’ll pay less than what you’re paying the two or three you may be currently using. Fees based on assets under management generally decline as a percentage of the assets as the assets increase. What you might pay to have an advisor manage $3M is very likely less than what you might pay two advisors to manage $1.5M each.
  1. You’ll likely improve your asset allocation. With different advisors, you’re probably going to have overlap or gaps in how your assets are invested. You may end up with more or less of one fund or stock than you might think appropriate, or have conflicting percentages of your assets invested in a particular asset class. This all underscores the importance of the next point.
  1. Comprehensive planning requires taking all your wealth into consideration. If you have so much money that you think planning is optional or unnecessary, it may not be an issue that your wealth is being managed in silos. If, on the other hand, you find value in projecting the cost of goals and the increase in assets over time, it’s difficult to do comprehensive planning when a percentage of the wealth and the details of it are cloaked in “the other guy (or gal) is handling that.” Simplistically, does the right hand know what the left hand is doing? As a whole, has your portfolio been rebalanced, given the run-up in the market? Are your advisors considering whether tax loss harvesting across your portfolio makes sense, given your capital gains? Does either of your advisors know what sales and purchases the other is doing?
  1. Record-keeping is easier when fewer firms are involved. Do you enjoy pulling statements together at tax time or paying your accountant to do so? When you take Required Minimum Distributions (RMD) from your IRAs, will your calculation include everything it should, and will you take your RMD appropriately? There’s no prize given by the IRS for the most complicated Schedule D. How much is your time worth?
  1. Your heirs will thank you. Managing your estate or your assets if you’re disabled can be a thankless task. If doing so requires contacting multiple advisors, it’s an even more difficult job. Maybe you can keep up with the multiple contacts and accounts—what about whoever steps in when you’re out of the picture?
  1. Focus accountability on your financial advisor. Ultimately, you are responsible for the management of your wealth. You hire, and you can fire. If you spread your assets around, you’re less likely to focus your attention on the service and attention you’re getting from each of your advisors. It can be hard to evaluate the value you get from one advisor; if you have two or more, it becomes increasingly difficult to distinguish the value added by each. If you consolidate your holdings with one advisor, the sheer magnitude of what you’ve entrusted to him or her forces you to make sure you both see eye-to-eye on what he or she is doing for you.

If you’ve divided your assets among different advisors, take stock of how satisfied you are with each. Unlike investing, where diversifying how you employ your assets makes sense, spreading your business among multiple advisors can reduce the effectiveness of your approach to wealth management.

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Disclaimer: The information provided here is general and intended as educational in nature. It is not intended nor should it be considered as tax, accounting, or legal advice. Investec Wealth Strategies and its advisors do not provide tax, accounting, or legal advice. We recommend you seek the counsel of your attorney, accountant or other qualified tax advisor concerning your situation.