By Wayne Cooper,
CEO, Wealth Management Exchange

Most of my advisors have told me "It's best for us to be your quarterback and oversee all your investments vs. having multiple firms manage your money." That's right, it's best for THEM. But is it best for MY family and ME?

They justify the need to oversee my overall portfolio on the basis that it will enable them to ensure that proper allocations and rebalancing takes place. But it's also in their self-interest - the more they manage, the more they get in fees, and if it's an exclusive relationship, they don't have to constantly compete for my money.

When I sold my company 5 years ago, I wasn't sure which investment firm(s) to go with. I had existing relationships with several firms and friends had recommended a variety of hedge funds and shared family offices for me to add to the mix.

Diversify Investment Advisors to Reduce Risk

I decided that, just as a diversified portfolio of stocks reduces risk, a diversified set of advisors would also give me a variety of opinions, styles and alternative investment options. Having a few money managers that I could track against each other would also add a healthy level of competition. I told each "If you outperform the others, I'll give you more to invest."

I'm glad I didn't give any one firm total carte blanche. I learned that different firms are better at different things: some are better at growth stocks, others are better at value investing, still others better at bonds, real estate and hedge funds. Many firms also have their own proprietary products that they have a bias to push, which might or might not be best in class.

One of my advisors had me in a few bonds; they were the underwriters. Another recommended I reduce my outside hedge funds, which were performing well, to go with their new hedge product, which really wasn't a hedge product at all. It was just using hedge fund pricing (2% plus 20%) vs. the normal 1% for public stock picking.

At the end of the day, our estates and investments are too important to completely hand over to someone else. Yes, we can delegate select functions like money management to those who have the training, experience and willingness to be tied to their Bloomberg terminals, but ultimately we must stay on top of them and make sure that they are performing well, executing our plans and charging reasonable fees. We must retain the quarterback position.