You know your financial advisor is doing a good job when they catch problems you didn't know you had. Returns matter, but a rising market makes almost everyone look good. The real test is whether your taxes, your plan, your estate documents, and your investments are being run as one strategy by someone who calls you first.
In 20-plus years, a lot of my work has been reviewing plans other advisors built. Most of what I find isn't dramatic. It's what's missing.
Why Aren't Good Returns Enough to Judge a Financial Advisor?
You can buy market returns for a fraction of a percent. If your advisor's whole value is the portfolio, you're paying for something you could get almost anywhere.
In a strong market, nearly every portfolio looks fine. You find out what you're paying for when something else happens. A layoff. An acquisition. A death in the family. A tax bill nobody saw coming.
So the question isn't "Did my account go up?"
It's "What did my advisor do this year that I wouldn't have done on my own?"
What Should a Good Financial Advisor Actually Be Doing?
A written plan you've seen this year. Not a binder from 2019. A plan that reflects your income, your equity, and your goals as they are now.
Tax coordination. Your advisor should know your bracket, your vesting schedule, and your CPA's name. Ideally the two of them actually talk.
Proactive calls. When tax law changes, your company gets acquired, or the market drops 20%, you should hear from them before you think to call.
Estate and beneficiary reviews. Documents and beneficiary designations checked on a schedule, not after someone dies.
Protection. Someone should have looked at your disability and life coverage against what your family would actually need.
Fees you can explain. You should be able to say what you pay in dollars and what you got for it.
If your advisor only shows up for the annual portfolio review, you have an investment manager. That's fine if it's what you want. It isn't planning.
What Did Nine Years of "Fine" Cost? About $300,000
Kristen is 46, an SVP at a Boston-area company. Household income around $950,000. $3.4 million invested with the same advisor for nine years, plus $1.8 million in the company's deferred compensation plan.
The advisor was pleasant. Returns tracked the market. Reviews happened on time. The couple came to me because a colleague had gotten a second opinion and they wondered if they were missing anything.
Years earlier, Kristen elected to take the entire deferred comp balance as a lump sum at separation. Nobody had looked at that election since. Kristen planned to leave work at 55.
A $1.8 million lump sum in one year lands almost entirely in the top federal bracket, 37%. Massachusetts adds its 5% income tax plus a 4% surtax on income over roughly $1 million. That's about 46% on most of the payout. Call it $828,000 in tax.
Spread over ten years at $180,000 a year, in years without a salary, most of that income falls in the 24% federal bracket or lower, plus Massachusetts' 5%. Call it 29%, or about $522,000.
The difference is roughly $300,000.
The plan allowed a change as long as the new election was made at least 12 months before the scheduled payment and pushed the first payment back at least five years. Kristen was nine years out. Plenty of time. The first installment now starts at 60, and the taxable portfolio covers the gap from 55. We built the plan around that trade.
That wasn't the only gap. Their wills were from 2013 and named a guardian who had since moved across the country. They were well above Massachusetts' $2 million estate tax threshold with no trust planning at all. And $420,000 was sitting in checking.
None of it showed up in a performance report.
Kristen moved the accounts.
How Do I Know If I'm Paying Too Much for My Financial Advisor?
Start with the number in dollars. 1% of $5 million is $50,000 a year.
Then write down what you got for it this year. If the list is "rebalancing and one meeting," that's expensive. If it includes a deferred comp decision worth six figures, it's cheap.
The fee structure matters less than the math. Flat fee, percentage, or both, you should be able to name what you pay and what it bought.
What Are the Red Flags That My Financial Advisor Isn't Doing Enough?
- You've never been asked for your tax return.
- Your advisor has never spoken with your CPA or estate attorney.
- You can't remember the last time they called you first.
- Your equity comp or deferred comp isn't in the plan. Or there is no plan.
- You don't know what you pay in dollars.
- Nobody has checked your beneficiary designations in years.
What If My Financial Advisor Is Actually Doing a Good Job?
Then you'll know fast. A good advisor welcomes the question.
Sometimes a review shows the advisor is doing solid work, and I say so. Sometimes it looks like Kristen's: a clean statement and a six-figure problem nobody raised.
When we do a second opinion, we look at the whole picture, not just the portfolio. Your tax return next to your investments. Your equity and deferred comp against your vesting calendar. Your estate documents and beneficiary designations. What you pay and what it buys. You get a straight read on what's working, what isn't, and what it's costing you.
Frequently Asked Questions
How often should my financial advisor contact me?
More than once a year. An annual review at minimum, plus outreach whenever something changes: tax law, a vesting event, a market drop, a new job. If every conversation starts with you calling them, that's backwards.
Should my financial advisor talk to my CPA?
Yes. Your advisor makes decisions that change your tax return, and your CPA sees the results months later. When they never talk, you're the only one connecting the two. Ask your advisor when they last spoke with your CPA.
How do I compare my advisor's returns fairly?
Use a benchmark that matches your allocation, after fees. A 60/40 portfolio shouldn't be measured against the S&P 500. And returns are one piece of the job, not the whole job.
Is it disloyal to get a second opinion on my financial advisor?
No. You'd get one before surgery. A second opinion on a multimillion-dollar plan is normal due diligence, and a confident advisor won't mind.
What should an annual review with my advisor include?
Your plan, not just your portfolio. Taxes, equity comp, cash flow, insurance, estate documents, beneficiaries, and whatever changed in your life this year. If the meeting is mostly a performance chart, ask for more.
Should my financial advisor know the rest of my family?
Eventually, yes. Money moves between generations, and decisions about your parents' estate or your kids' inheritance are hard to plan around if your advisor has never met them. Many of the families I work with now include the original clients, their children, and their parents. If your advisor has never asked who else is affected by your plan, they're seeing one piece of it.
How hard is it to switch financial advisors?
Easier than it sounds. Accounts usually move by electronic transfer in a week or two, and your new advisor handles most of the paperwork.