Advisor Diversification: The Scenario Where Diversification is Not Beneficial

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We are told time and time again that one should never put all their eggs in one basket. In most instances, this statement would be valid. However, this is not true in every case; especially with regards to Advisor persification.

There are many detrimental effects that can result from having multiple Financial Advisors. You would think that by having more than one advisor that you are actually increasing your likelihood for financial success. Unfortunately, you are most likely hindering your chances for success. Having multiple advisors may create adverse inconsistencies between your investment strategies. The disparities can ultimately yield you with varying results; some of which may not be not ideal to both your short and long term financial goals, investment constraints and capital needs.

The communicative inconsistencies that may result from the use of more than one advisor can create financial issues for an investor. Advisor persification can also create high concentrations of investments that are not parallel to an investor’s risk tolerance or investment objectives. Neutralization of one’s investment strategies is another likely byproduct of persification amongst multiple Financial Advisors. With multiple advisors, you may actually be doubling up on or be creating competing investments for yourself. This adverse reality can most certainly create far more risk than the investing inpidual had originally anticipated. With regards to market cyclicality, there is never a guarantee that even the most qualified of all Financial Advisors won’t lose investment value at some point in their career. Having multiple advisors will not eliminate that risk of loss, but instead it could magnify it in times of bad financial markets.

The truth of the matter is, there is never a good reason to have multiple advisors. By having a concrete investment plan, a single advisor is more than sufficient in implementing this strategy that is specifically tailored to your risk tolerance, financial goals and capital needs. It doesn’t take more than one Financial Advisor to successfully employ that plan. Trust is by far, the single most important element rooted within the relationship between a client and their Financial Advisor. By persifying amongst multiple advisors, one has communicated a lack of trust from the get-go; defeating the entire purpose of the client-advisor relationship. If you work with more than one advisor, who is going to oversee the communication between them to insure that their inpidual plans and strategies mesh and work well together with your short and long-term goals? Chances are the answer to that question is, no one.

persification is a very important strategy when it comes to investing, however, it should be the advisor persifying for you; not you persifying amongst advisors. Call us today at Mitlin Financial and see why having one trusted Financial Advisor could be a more optimal strategy for securing your financial future.

Disclaimer: This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

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