by Rick Kahler

Have you ever wondered whether your investment advisor follows their own investing advice? The answer may surprise you and tell you a lot!

There is an old adage that says, “What is good for the goose is good for the gander.” In today’s urbanized world, most of us probably wouldn’t have the slightest idea what’s good for geese. Yet, we still know that this saying reminds us to be cautious about anyone who makes recommendations they don’t follow themselves. This is especially important when it comes to investment advice.

Have you ever wondered how your investment advisor invests their money? Have you wondered if the agent selling you cash value life insurance as a retirement investment is investing their retirement in the same? Or whether an advisor recommending a specific mutual fund, stock investment, or bond issue buys the same for their own portfolio?

My suggestion is to stop wondering and ask. I rarely have a client or prospective client ask me whether I invest my own money in the same way I invest the funds of clients. Most people think it is just too personal to ask how an advisor is investing their own funds and that the advisor may take offense.

Yet, knowing how anyone offering investment advice to you invests their own funds is highly relevant. It’s especially wise to ask this if someone is trying to sell you on an “exciting opportunity” that sounds too good to be true. An evasive or vague answer is an obvious red flag, but even with a fiduciary advisor, I believe asking how they invest their own money is a legitimate question. I, for one, am happy to answer it. Yes, the investment vehicles and strategies I recommend for clients are the same ones I use for myself.

Certainly, there are good reasons why an advisor would not have the same asset allocation that they recommend for you. They may be significantly younger or older, or they may have a significantly more aggressive or adverse tolerance for risk. However, if your advisor outsources your investments to SEI but uses Vanguard, I would want to explore that. Or if your advisor is about the same age as you, but has a significantly different asset allocation and uses none of the investments she recommends that you invest in, I would want to know why.

If an advisor suggests that you put 35% of your investment funds into a private REIT but they don’t own a private REIT, what’s the reason? Or if they are recommending you own a managed futures limited partnership but they don’t own that same partnership or any managed futures funds, you should ask the reason. Or maybe they are recommending the A shares of an actively managed mutual fund but themselves purchase passively managed institutional shares.

If you don’t feel comfortable or knowledgeable enough to ask questions like these about specific investments, it’s still important to find out about an advisor’s broader approach to investing. Do they recommend that you “buy and hold,” yet they actively time the market with their own portfolio? Or maybe they actively trade your portfolio while following a “buy and hold” strategy themselves.

While portfolio specifics might vary, I want any investment advisor to buy into the same investment philosophy they are recommending to me.If they are going to be timing the market with my funds, I want them to be making the same market moves with their own funds. If a “sauce” isn’t good enough for the advisor personally, it isn’t good enough to recommend to clients.

• 7 Questions To Ask a Potential Financial Advisor
• Do You Need a Financial Advisor In Retirement?
• How To Find the Right Financial Advisor for Your Retirement Years

Reviewed February 2024

About the Author

Rick Kahler, MSFP, ChFC, CFP, is a fee-only financial planner and author. Find more information at KahlerFinancial.com. Contact him at Rick@KahlerFinancial.com.