It may seem odd to think of professionals consulting other people in the same field on a personal basis, but they do. Just as doctors have their own general practitioners, some financial planners have their own financial planners.
The decision to do your own financial planning or to consult a professional colleague is a personal decision – neither good nor bad. To determine the path forward, advisors need to make an honest assessment of their needs and expertise. Their final decision depends on a range of factors – but what are they and why would an advisor choose one option or the other?
“You are your first customer”
Becoming a financial advisor involves a lot of study and learning, passing the exams required to qualify, and years of hands-on experience. So you could say that all of this puts them in an ideal position to manage their own personal finances.
That’s why Natasha Percy-Baxter, director of associate partner firm St James’s Place PercyBaxter Wealth Management, does her own financial planning. “As a counselor you have to build your qualifications and experience – if you’ve worked at that level, why not apply it to yourself? You are your first customer – why don’t I sit down with myself? ” she says.
When Percy-Baxter qualified, she made sure to get the most out of her pension. “I spent an entire week going through my papers. I reviewed everything, consolidated it and made sure it aligned well with my attitude to risk,” she says. “So I thought let’s maximize my tax allowance, am I getting the most out of my Isas?”
Percy-Baxter likes his own style of advice and it’s understandable that if advisors think their clients’ best interests are served by doing things a certain way, they’ll want to see the same approach when it comes to their personal finances. .
“Given thousands of conversations with clients over the years, advisors have a solid understanding of key financial goals and the reviews and experience give them the knowledge of the products and portfolios to use to achieve them,” says Brian Byrnes, a former financial adviser who is now head of personal finance at digital wealth manager Moneybox. “However, we are all subject to biases and advisers are no different.”
That’s something Percy-Baxter accepts, but she says it all hinges on the advisor’s ability to step back and almost remove themselves from the equation. “My approach was ‘here’s my paperwork – this is me’. I took all judgment away, just looked at what was in front of me,” she says. “If I can take the subjective element out and look at it in black and white, it wouldn’t make sense to go to another adviser.”
However, there are circumstances in which Percy-Baxter would consider consulting someone else. “I don’t deal in mortgages, so if I needed mortgage advice, I would see someone else,” she says. So if an advisor specializes in some areas but not others, it may be worth getting advice in areas they don’t cover from someone who does.
One obvious reason to consult another advisor highlighted by Percy-Baxter is simply not having the time to do so. Although advisors are more than capable of doing their own financial planning, it can take a back seat when they’re busy helping clients.
Everyone knows the stereotype of the builder who has the worst house on the street because he’s always working to make other people’s homes look great, but sometimes the same could be said of advisors. Putting the client first can mean that the advisor’s own financial affairs take a back seat.
“If you’re an advisor, you know what you need to do,” says Percy-Baxter. “But I would say set a deadline for yourself to do your own financial planning. If it comes and goes without you doing anything, outsource it, because other priorities take precedence.
There are other reasons why it might be better for advisors to have someone else handle their own financial plans. Byrnes says advisers can be overconfident in their own investments and can be prone to loss aversion. “A second pair of eyes can be helpful in highlighting some of those blind spots,” he says.
Market volatility has been a concern recently as the UK grapples with the cost of living crisis and the impact of the government’s response to it. Byrnes says that in times of extreme market volatility, even advisors can get nervous, despite how much they know about long-term investing. “It’s good because it helps advisors empathize and ultimately advise their clients, but it’s another example where a conversation with other advisors and planners can be helpful. he says.
Younger advisers may have limited experience in choppy investment waters, while those with more experience will have gone through periods of high inflation, rising interest rates and weaker growth before. “Advice from planners who have seen these things before could be invaluable,” says Byrnes.
David Swanwick, Head of Client Communications at Dimensional Fund Advisors, has spent over a decade as a financial advisor in Australia. One of the things that stands out to him is how becoming a client of another advisor can give advisors more insight into the advice-taking experience. This can be used to bring new ideas into their own financial planning practice. But in addition to learning from another adviser, Swanwick says the relationship can also help advisers who need to put succession plans in place, because you can have an adviser on hand to step in almost as a backup.
“One of the big challenges in financial planning is making sure advisors have a good succession strategy,” says Swanwick. “Unfortunately things have happened to advisers we know of and luckily there was another adviser in the background to get back to work, reassure the widow and the team and make a terrible situation less terrible.”
As a former advisor, Swanwick is able to do his own financial planning but prefers consulting someone else. But points out that advisors will likely use their own financial planner in a different way than members of the general public.
“I don’t use my financial advisor to answer technical questions. I use them as a sounding board and to help me discover my blind spots. It’s valuable to have someone you trust who can act as a high-quality sounding board,” he says.
“Together we know more than alone” is how Dimensional defines its approach to investing and Swanwick applies the same idea to financial planning, with two advisors who together know more than they alone.
However, he acknowledges that there could be problems in a relationship between two advisers if their philosophies are not aligned. “For example, if an adviser has experience reviewing the markets and picking stocks, but is talking to someone who doesn’t,” he says.
Percy-Baxter reckons that being the kind of adviser she is – someone with a keen eye for detail – she would most likely be a ‘backseat driver’ if she took anyone else’s advice. . “But it’s good to see how other advisers do things, because there are little nuggets you can take away,” she says. “Trust is the other thing – you trust yourself to give advice to others, but do you trust yourself to give advice to yourself?” And if you’re doing your own advice, it shouldn’t be a one-time thing – you need to take the time to consider it.