Like Your Portfolio, Your Financial Team Should be Diversified, Too
You don't put all your eggs in one basket, neither should you put all your trust in one financial professional. Having a cadre of pros making decisions about your investments together makes for a better result.


While it’s often overlooked by many financial professionals, diversifying your financial management team can be just as important as diversifying your portfolio. That means you should consider avoiding relying on a financial professional who has a single individual calling the shots and, instead, opt for a financial professional who taps into the expertise and experience of many people.
Too many individuals simply aren’t aware that they have the ability to ask questions about who allocates their money and makes financial decisions. If you want real diversification and strategies that can help preserve your financial assets, you need to ask questions about who gets to sit at the table when your financial professional makes the important decisions.
Most individuals don’t think much about the process of how their financial professional makes financial decisions. They simply trust their financial professional and leave it at that, not asking important questions about who controls their money. That can be a major mistake.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Everybody thinks they understand what the market is going to do, and they never stop to consider the alternatives. Take, for example, last year’s presidential election. Hillary Clinton was expected to win the White House, and many financial professionals planned accordingly. Of course, when the smoke cleared, Donald Trump was elected, and growth portfolios did better while interest-bearing investments, which were expected to do well if Clinton won, stalled. Investors would have been better served working with financial professionals who were ready for either Clinton or Trump to win and reacted accordingly, rather than those who simply expected Clinton to prevail.
The election’s impact on investments serves as a reminder that listening to a single financial professional who follows one philosophy can undermine your portfolio. Financial professionals can bet on the wrong financial vehicles and destroy their clients’ holdings through their bad takes on the market. Frankly, it happens all the time.
Diversifying your holdings in the market is a great strategy, of course, to help protect your assets, but it’s not enough. You also need to consider diversifying your financial management team. That means you need a team of professionals who listen to numerous voices and draw on their insights and experience as they craft together a plan to help increase your holdings and while striving to preserve your retirement.
Different managers rely on different thought processes and often follow different philosophies when it comes to wealth management. That’s usually a plus because they usually will expose you to new ideas and opportunities. Of course, there are downsides when it comes to relying on multiple professionals. Let’s say, for example, you bring in three professionals who invest your portfolio. They might not be talking to each other or looking at your entire portfolio on a real-time basis. That can be a recipe for trouble because they might be putting your money in the same financial vehicles or not seeing the bigger picture. But even the best attempts to diversify your financial professionals can lead to duplication and put your hard-earned wealth in peril.
One way to avoid this kind of problem is by asking questions of your financial professional on how they and their firm operate. The right kind of fiduciary adviser team can help to ensure you are relying on truly diversified management while avoiding duplication. If a company relies on multiple individual institutional managers who each have committees helping guide their investments, that’s a good sign they understand how important it is to diversify the thought process, especially if there is internal coordination and full transparency to cut down on duplication. This kind of adviser team might have two or more income managers who rely on completely different committees and specialists when it comes to managing portfolios. Such diversification also helps ensure your advisers do not follow a single management philosophy, which could be a big problem for your portfolio if all of your eggs are in a flimsy basket.
There are other important questions you can ask to make sure your financial professionals rely on true diversity when it comes to building, maintaining and increasing your wealth.
- Ask who makes the investment and buying and selling decisions.
- Ask if one person, many people, a single team or multiple teams make these decisions.
- Ask who ultimately gets the say when it comes to buying and selling.
The overwhelming majority of financial professionals rely on a single broker who has the power to make decisions. You’ll be better served to work with a professional who relies on numerous experts instead of one individual calling the shots. Simply put, your chances for growing your portfolio are far better if you are relying on numerous experts — some of whom will get the market wrong, most of whom will get it right — rather than a single broker.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Reid Johnson, TX license 1068067, is president and founder of Texas-based Lake Point Advisory Group, LLC (www.lakepointadvisorygroup.com). As a financial professional and fiduciary when providing financial advice, he is dedicated to providing his clients with the individual attention necessary to help them pursue their financial goals. He has contributed to various media sites, including Wall Street Select, CNN and The Star-Telegram.
-
Rally Fades on Mixed AI Revolution News: Stock Market Today
All three main U.S. equity indexes opened higher but closed lower as a seven-session winning streak for the S&P 500 came to an end.
-
Stretch Your Holiday Shopping Budget Further with These Under-$50 Gifts That Don't Feel Cheap
Amazon October Prime Day is the perfect chance to nab some under-$50 gifts that feel more expensive than they are (because normally they would be).
-
The Spendthrift Trap: Here's One Way to Protect Your Legacy From an Irresponsible Heir
A spendthrift clause in an estate plan can protect an inheritance from a financially irresponsible child's debts and poor decisions.
-
Adapting to AI's Evolving Landscape: A Survival Guide for Businesses
Like it or not, AI is here to stay, and opting out could be disastrous for your organization. Instead, focus on what you can control and be flexible, as AI is still evolving.
-
Striking Gold (or Gas): A Financial Pro Unpacks the Nuances of Energy Investing
Investing in the energy industry, particularly oil and gas, involves understanding the facts about how projects generate returns through cash flow and long-term asset building, while also being aware of the risks.
-
Escaping the New Golden Handcuffs: A Financial Expert Has a Plan for Today's Executives
Feeling stuck in your job? It could be your complicated compensation package, but it also could be where you live, your family or even how you view yourself.
-
I'm a Financial Planner: Here's How to Invest Like the Wealthy, Even if You Don't Have Millions
Private market investments, once exclusive to the ultra-wealthy and institutions, have become more accessible to individual investors, thanks to regulatory changes and new investment structures.
-
Four Ways a Massive Emergency Fund Can Hurt You More Than It Helps
Saving too much could mean you're missing opportunities to put your money to work. Redirect some of that money toward paying off debt, building retirement funds, fulfilling a dream or investing in higher-growth options.
-
I'm a Financial Planner: How to Dodge a Retirement Danger You May Not Have Heard About
Timing is everything, and sequence of returns risk can mean the difference between a retirement nest egg that's overflowing … or empty.
-
Caring for Aging Parents: An Expert Guide to Easing the Financial and Emotional Strain
Early conversations, financial planning and understanding the progression of care needs can help to mitigate stress and protect family relationships.