MONEY financial advisers

How to Be Nosy About Your Financial Adviser’s Finances

magnifying glass looking at new $100 bills
LM Otero—AP

You probably want to know how rich your financial adviser is. Here are some better ways to pry about his or her money.

What’s your net worth?

We financial professionals think nothing of asking clients this question. If the tables were turned, though, and clients or prospective clients asked the same question of us, how would we respond?

Every now and then this issue comes up in conversations among financial planners. Some advisers think their net worth is none of their clients’ business, any more than doctors’ cholesterol levels are any business of their patients.

Others are concerned that a single number like net worth is incomplete information and can even be misleading. Knowing a financial professional has a net worth of, say, $5 million doesn’t necessarily mean the person is a trustworthy or capable financial planner. Net worth tells prospective clients nothing about where the money came from. The planner may have inherited it, won the lottery, made it through a business other than financial planning, earned it from commissions on poor investments, or even obtained it illegally.

Nor does net worth reveal anything useful about someone’s understanding of money or knowledge of financial planning. I’ve worked with plenty of multi-millionaires who were horrible money managers and inept at investing. There are also many brilliant young planners who haven’t had the time to accumulate a large net worth.

I suspect that most clients who want to know about their planners’ net worth actually have several deeper questions in mind. Some may be asking if the professional actually follows his or her own advice. Imagine how troubling it might be to find out your financial planner doesn’t have a retirement plan, is a habitual over-spender, or hasn’t gotten around to making a will.

Another reason for the question may be a concern whether the planner is financially stable and will be around in the future. During the Great Recession, many financial professionals saw their revenues fall by 30% to 40%. Some who did not have a business emergency reserve had to resort to laying off staff, cutting services, or in some cases closing their doors.

Still another concern may be whether the planner is familiar with a potential client’s particular financial issues. This is especially true of high-net-worth clients. They need to know a planner can relate to the complexities, responsibilities, and emotional challenges of managing wealth.

All of these are legitimate concerns. Knowing a financial planner’s net worth, however, doesn’t address those concerns. It would be more useful for clients to get answers to questions like the following:

  • Do you follow the same advice you give clients? Give me some examples.
  • Do you have six months’ living expenses in an emergency account?
  • Do you invest your money in the same manner you will invest mine?
  • If I were to run a credit report on you, what would it tell me?
  • What are some of the things you have learned from your financial mistakes?
  • Tell me what your company has in place for emergency planning and succession planning.
  • Tell me why you can relate to someone with my net worth and the issues I am facing.

Very few prospective clients are likely to ask questions like these. That doesn’t mean they don’t want to know the answers.

Planners who want to provide exceptional service to their clients might consider providing such answers freely and transparently, without waiting to be asked. We expect clients to trust us with their financial information. One way to build that trust may be to share some information of our own.

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Rick Kahler, ChFC, is president of Kahler Financial Group, a fee-only financial planning firm. His work and research regarding the integration of financial planning and psychology has been featured or cited in scores of broadcast media, periodicals and books. He is a co-author of four books on financial planning and therapy. He is a faculty member at Golden Gate University and the president of the Financial Therapy Association.

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