Wealth Management – BBQ and Planning
Wealth management is like this: imagine you walk in to a grocery store saying, “I’m thinking of having a barbeque, can you help me?” A helpful employee would probably point you toward the meat section. Ribs, steaks, burgers – barbeque stuff. Now walk out of the grocery store and into the Home Depot across the street. You tell a helpful employee you’re thinking of having a barbeque. You will be shown how to get to the outdoors section where you can buy a shiny new gas grill with a side burner and a rotisserie system.

Think about that for a second, wealth management is a lot like the BBQ story. You asked the same wealth management question twice, with the same objective in mind. The results couldn’t be more completely different. Guess what – the same thing happens every day in the financial services industry when investors go shopping for financial planning advice and wealth management advice.

Consider this. You walk into a wealth manager with $20,000 and tell the wealth manager you are looking to protect your assets – you want the money to be somewhat liquid, but you don’t want to lose any money. Odds are good the wealth manager will sell you a CD. But if you take the same question to an insurance agent, the helpful employee there will probably suggest an annuity. The same question in the hands of a broker will get you a nice municipal bond.

Now, those are all reasonably safe investments – some more than others. But think of all the questions that those helpful employees didn’t ask you! The wealth managers never asked what kind of tax liability you wanted with your investment. Nobody asked if this is IRA or non-IRA money. Or how soon you need access to the money, or what rate of return you need, and oh, by the way, how’s your risk tolerance?

I suggest we rethink the way we look at wealth managers, banks, insurance offices, and brokerages. Most people think that financial advisors live there. No! These places are stores, every bit as much as Home Depot and your hometown grocery store. The “advice” you get depends to a large extent on what they sell. Your banker won’t sell you bonds for the same reason that the Home Depot employee won’t recommend sautéed onions on your burger and a nice red wine. It’s not what’s for sale at that store.

Take one more step back from this picture, and you’ll see that many businesses that claim to be wealth managers or financial advisors are also stores. They’ve got inventory, and employees who are trained to move that inventory out the door. If you’re looking for competent financial planning at these businesses, you’ve got a problem.

Can your wealth manager take your investment goals and impartially shop the whole financial services industry for the products that meet those goals? Or is she constrained by her inventory, looking for which of your goals are a good fit for her products?

Is your wealth manager trying to sell you the rotisserie attachment, when all you really need is the right bag of chips? Something to think about. Happy barbequing!