The Small Decisions that Lost a $5 Million Account

January 13, 2015

by Dan Richards

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A recent conversation with a woman looking to invest an inheritance highlighted how seemingly trivial decisions by advisors can make a huge difference. It became apparent that an instrumental factor in her selection of an advisor was the office environment in which they met.

Narrowing down the options

The story began last fall. I’ve taught for many years in the MBA program at University of Toronto and one of my students – let’s call her Marci – asked if we could meet to get some advice on a personal issue. When we sat down, she explained that her mother had recently passed away unexpectedly. Marci is in her early 30s and before starting her MBA had worked in sales for a real estate developer. Her dad had been a senior executive with a large public company and had passed away some years earlier; since she was an only child, she found herself inheriting a large house as well as an estate approaching $5 million.

This was a complete surprise,” Marci said when we met. “I knew that my dad had done well and that my mother was comfortable but we had never talked about money. I really want to get some professional advice on what to do. The private banker who my mother was dealing with and the broker at the bank who’s been handling the account have been asking me to meet. But my preference is to look for an investment advisor closer to my age. The problem is that I can’t get recommendations on advisors from anyone I know. I don’t want friends to know about my inheritance and none of them have enough money to work with an advisor used to handling this kind of money anyway.”

As we talked about the options in terms of advisors, I explained the difference between advisors who focus primarily on investments– the category into which her mother’s advisor seemed to fall – and wealth advisors who take a broader perspective on their clients’ financial situations. I then walked her through the alphabet soup of advisor credentials. After further discussion, Marci said she was definitely interested in someone who took a total-wealth approach.

I suggested Marci interview two or three different advisors. As a starting point, she could talk to the private banker her mother had dealt with and ask for an introduction to a younger advisor. I also recommended that she meet with her mother’s accountant and lawyer seeking referrals for advisors who might meet her needs. To make these conversations productive, I urged her to be very clear about what she wanted. At the end of our conversation, Marci thanked me and told me that our discussion had helped clarify her options.

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