Broker Check
It's What Your Advisor DOESN'T Know...

It's What Your Advisor DOESN'T Know...

January 15, 2024

In my prior years of owning and managing two Property & Casualty Insurance agencies, I saw more than one instance of an insurance company declining to insure a home that had peeling paint on the outside.  While this usually angered the homeowner, I understood it from a risk perspective.  To the homeowner, it was their home - their castle.  To the underwriter at the insurance company it was just another piece of paper that came across their desk that day.  Without knowing the homeowner personally and what their values and attitudes were, the only thing the underwriter had to go on was what they could see.  And if they could see from photos that there was no pride of ownership and that the home wasn't properly maintained on the outside, they had to assume that it wasn't being maintained properly on the inside either, where the majority sources of claims were (plumbing, electrical, heating, etc.).  It was the insurance company's money that was at risk, after all.

As a 26-year financial advisor, I'm amazed at how many people give less scrutiny to the person they've entrusted with their life savings than an insurance underwriter does to a home with peeling paint.  They see what's happening on the outside but never question what's happening on the inside... of their advisor's head, that is.  Let me explain.

It is no secret that some financial advisors come into the industry from somewhere else - after having worked in some other field, as a second career, etc.  I'm no exception to that rule - my bachelor's degree is in Aerospace Technology.  Yet I'm astonished that some seem to not want to dedicate themselves to becoming a true professional.  I'm even more astonished that some of their clients seem to overlook this fact.  If you doubt me, do a Google search on the "Financial Advisors" in your town and click on some of the names that are well known or have been around for several years.  Go to their websites and look up their credentials.  You will find that some of them have not invested their time and money to pursue a professional designation in the field that they've chosen to spend their life in.  You will probably find that very few of the "advisors" in your town have earned the CFP® or ChFC® designations, and also a graduate degree in the field of financial services, which may typically take years to earn.  

I'm going to make the assumption that anyone who seeks out professional financial advice does so because they recognize their own ignorance with regard to financial planning and investing.  They rightly recognize that what they don't know may be more important than what they do know.  But the reality is that they may be working with someone who doesn't know a whole lot more than they do.  What you may be concerned with is what your advisor doesn't know may be more important than what they do know... because that could mean a world of difference to your financial future.  While they're probably a very nice and well-meaning person, the "peeling paint" on their resume may raise some red flags.