What Makes Your Financial Advisor Tick?

What Makes Your Financial Advisor Tick?

SA for FAs podcast host Gil Weinreich has written a book, The Mentor: A Business Parable, that brings the reader into the lives of two investment advisors with different approaches. Advisors and their clients gain valuable insights into what makes financial advisors tick.

The Mentor: A Business Parable

As an investment advisor veteran, I really enjoyed this book and appreciate its insights into my profession. Gil uses the construct of a play to bring us into the lives of two rookie advisors – Reggie and Benjamin. Each chooses a mentor, and each follows a distinctly different path.

Do you use an investment advisor? Ever wonder what motivates them? Reggie’s choice of mentor reveals his motivation. He chooses the most successful (richest) financial advisor he can find. Benjamin chooses an advisor that his father recommends despite the fact that this mentor is not on the list of successful advisors. Reggie chooses to run a business while Benjamin prefers a practice.

Gil shows us the effects of these choices on both the advisor and his clients. The business approach is exceptionally good at asset gathering and uses the maximum risk investment model. Clients get richest by taking as much risk as they can tolerate. By contrast, the practice approach provides a comfortable lifestyle for the advisor, but no mansions. The investment approach is to take no more risk than is necessary.

Clients are happiest with the high-risk approach, until they are not – when markets crash. Gil shares the angst that Reggie and his clients suffer in a market crash. It’s “The Tortoise and the Hare” in financial wellbeing. Investors can win by not losing. I have personally seen this happen in target date funds and have written about it for Seeking Alpha.

Both of our heroes achieve their goals. Reggie is rich but spends most of his time managing his successful business. Benjamin loves his work, his life, and his family. In the end, Reggie decides to change course, and we are left wondering how that works out for him.

Now you know. Which path would you like your investment advisor to follow?

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I am a 50-year pension consulting veteran who is currently focused on helping his fellow baby boomers through his Baby Boomer Investing Show on FaceBook and YouTube. I believe boomers are taking too much investment risk and question the investment advice they are getting. I am comfortable, but not rich.

Source: Seeking Alpha

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