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5 Things Wealthy People Demand of Their Investment Advisor


Costa Rican gold in a museum vault.

Thirty plus years in the tax field has exposed me to the good, bad and downright vulgar. In the early 1990s I was a top producer at a broker/dealer for several years before refocusing on the accounting end of my practice. Before I left the industry changes were underway. Fee-based asset management was gaining adherents.

The old model of commissions was experiencing the first crack in its armor. Leaving the industry didn’t leave a void in my knowledge as clients consulted with me when considering investments and reviewing their investment advisor.

Fee-based is all the rage today. Many of the original selling points from the 90s are still used today with the exception most reporting is now done digitally online. In a nutshell, people are doing all the fee-based work while still paying a fee.

Rather than call out firms selling fee-based products, I want to focus on how wealthy clients work with their fee-based advisor or firm if they handle investments themselves.

Less wealthy clients seek my advice, too. This allows me an inside look on how wealthy and pre-wealthy (is that politically correct enough?) deal with their investments and the people advising them.

There are remarkable differences. Readers will probably see some of these actions in their own behavior. The wealthy already know this stuff; they have people who have helped them accumulate wealth. The less than wealthy will see where they can change to improve their odds of achieving significant wealth.

Before we start we need to review what I mean by wealthy and non-wealthy. For this study I consider wealthy someone with $10 million or more in liquid net worth. The non-wealthy have a net worth of $500,000 or less in liquid assets.

The examples I use are from my office. I have many more examples of people working with advisors from the lower end of the spectrum. Still, with decades at my post I’ve noticed the speed at which people increase their net worth. Those who act like the wealthy tend to get there faster; those who don’t usually never get there or barely break into the seven figures.

One caveat: The market has been on a tear for nearly a decade now without as much as a meaningful pause. Everybody is smart right now! It’s easy to be smart when you’re winning. Mistakes are easily glossed over in a rabid bull market. Too many people will fail when they are challenged for the first time. Good habits and appropriate demands on your financial professionals will be your anchor in the storm.

5.) No churning! This goes without saying, except it needs to be said. Investment advisors are not immune to the pipe dream of trading your way out of a problem or to success.

You would be surprised how many investment professionals churn an account legally. Churning can be illegal, but my definition of churning is far broader and includes legal activities.

What I’m talking about here is not the typical churning of mutual funds or stocks to generate additional commissions. I’m talking about all the new fangled computer algorithms trading to generate tax-loss harvesting or asset allocation models.

Clients bring me these beautiful folders of color graphs and charts they received from their advisor. It’s junk! Yes, the folder has great information, but swaddled in plenty of BS. I think it’s done that way intentionally to cover for the times results are subpar. You can see the same thing online.

Wealthy people are less impressed with color charts and tax-loss harvesting. Tax-loss harvesting is a zero sum game most of the time with the only value deferred taxes. If you don’t have a large capital gains to offset you are limited to a $3,000 deduction against other income. The rest gets carried over. Tax-loss harvesting has its place, but is overused with several (we will leave unnamed) companies hawking these services.

What impresses the wealthy is intelligent asset allocation. Intelligent asset allocation needs rebalancing once per year. That’s it! No more playing with the money! Leave your fingers off it.

Instead of churning the wealthy avoid investment gains all together with the host of retirement and quasi-retirement options available. Another neat trick to not pay capital gains tax is to not sell a stock with a gain or, in some cases, gifting it to charity and getting massive tax breaks while avoiding capital gains taxes to boot.

Rebalancing your portfolio quarterly only gives the illusion the investment advisor is doing something to earn his keep. With rare exception, rebalancing the account is needed once per year max!

The wealthy know you can’t beat the market with a simple computer program. Moving money around causes tax issues, trading costs and potential missteps in handling the portfolio, leading to loss.

4.) Matching the market is not a bad outcome. When the stock market was crushing it back in the mid and late 1990s I had a client who was considering moving his portfolio to me. I interviewed him (Yes, I interviewed him! Every warm body walking through the door is not client material.) to find his objectives and to see if we had a similar philosophy. Early in the conversation he said he expected me to do better than 20% per year since anybody could produce those types of returns. I showed him the door.

Good times (like today) give people a false understanding of long-term gains in the broader market. If a potential client has an unrealistic expectation it didn’t pay to begin a relationship; he would be unhappy in a short period of time anyway.

I’ve never had a wealthy client ever spew such garbage. Wealthy people think matching the market is a good baseline to start from. If you drop everything into index funds you should expect to have index results minus fees.

Non-wealthy people always want to take a flyer with the next greatest thing, currently bitcoin. Wealthy people also realize some hot investments today could really be a long-term quality investment. Amazon and Apple are two examples proving their worth and Tesla and Netflix are felt by many to have promise.

Hot stocks are not intrinsically bad! Wealthy people know this. Less wealthy people over-weight the risk of their portfolio. For a few it means immense wealth and encourages other less wealthy people to try to emulate the lucky.

The wealthy allocate a small percentage of their funds to non-traditional investments or high flyers. A typical wealthy client will have the bulk, say 80%, in investments expected to match the underlying market*. The remaining 20% in invested in increasingly risky investments.

A typical example is the wealthy client with most of her money in broad-based market index funds with the remainder in quality individual stocks and a few speculative issues.

Non-wealthy investors complain to their investment advisor of market matching performance. Over the long run this is an enviable track record and the wealthy know it and hence, don’t complain about their good fortune. Even a small outperformance over long periods of time is a cause to celebrate. The difficulty in beating the market before fees is long.

3.) Consider taxes when presenting investment ideas. Taxes can take an awesome investment down to mediocre in three seconds flat! Non-wealthy investors are impressed by before tax results. Wealthy investors want to know what they keep after taxes.

Many times a great performing asset can find a home in a retirement fund to preserve before tax gains. Of course, the investment needs to be made from inside the retirement account.

Buying an investment with a long time horizon is better than short-term results! Non-wealthy people love the quick score, but lose when the tax man begs his share. Wealthy people know a long-term investment with years of upside means taxes will not be due for a decade or longer, allowing for more growth without taxes slicing out a major portion of the gain.

Taxes are not #1 on this list, but are the most talked about issue wealthy clients have once a new investment is introduced. I can count on one hand with fingers left over how many non-wealthy clients asked me about their expected returns after taxes. The non-wealthy who do ask are not non-wealthy for long.

Time for a break from the serious discussion with a cat picture.

2.) Research. Pretty booklets and brochures don’t cut it with the wealthy! The wealthy don’t like short cuts. They want detailed research with solid numbers and ratios. When is the last time a non-wealthy client asked me about an investment’s cash flow? I can’t remember it ever happening. The wealthy ask EVERY time. Cash flow is how investors are paid and how a company generates capital to invest. The wealthy are nervous when capital requirements are met with borrowed funds. It’s also why Warren Buffett likes Apple now, but didn’t bite twenty years ago.

Research comes in many forms. The most obvious is the lack of research. Investment professionals working with the wealthy know better than to bring an idea to the client without adequately vetting the investment. Wealthy clients ask a lot of questions before investing!

Less wealthy clients are more likely to say, “Cool!” at pretty baubles and trinkets. An S&P index funds doesn’t need a lot of research. Individual stocks and bonds do. Less broad asset classes also need extra research to verify it meets investment objectives. Alternative investments need continual research, even after the investment is made.

1.) Straight talk. If anything drives wealthy people crazy it is double talk. Wealthy people are wealthy for a reason! Most are self-made and don’t appreciate a condescending attitude. Technical jargon will nix a deal faster with the wealthy than anything else. Less wealthy are frequently impressed by such 47 letter words. The wealthy are not!

I’ve noticed wealthy people can sniff out BS from a mile away. That’s why they are wealthy! Investment advisors looking to pocket a quick commission of generate some easy fees are advised to seek out the less wealthy. The relationship between advisor and wealthy client will wither fast when the technical jargon and BS flies.

Honest answers, even bad news, are expected by the wealthy. They don’t have time dancing around an uncomfortable situation. They want straight answers now.

The less wealthy cling to every ounce of hope the losing investment will turn around. It never does. The wealthy lick their wounds and move one; the non-wealthy cling to hope when all hope is gone.

The wealthy are wealthy because they know when to move on. Honesty up front is the only way the wealthy want it.


The wealthy are a big mystery to non-wealthy people. It shouldn’t be that way. There is no big secret the wealthy possess! In a nutshell, the wealthy hate games: talk straight, do your research before contacting them and consuming their time, consider taxes when researching an investment, matching the market is not a crime and most of all, don’t churn their money for a quick fee or to hopefully score big.

When handling your own money expect the same! It’s what the wealthy do.

And that is why you read to the end of this post.


* Each investment has an underlying market. Some wealthy investors keep a lot of their net worth in bonds. Some like equities. The goal of the wealthy is for their investment objectives to match broad market returns they’re invested in. Example: a wealthy client with a risk tolerance for bonds only might have 80% of her funds in Treasuries or high rated corporate and municipal bonds, with the remainder in lower rated bonds and a few percent in junk bonds or junk bond mutual funds/ETFs.

Keith "Shin" Schindler

Wednesday 6th of December 2017

Hey, Dude!

Was great to hang with you guys at FinCon. Great conversation, for sure, AND we were in the same age bracket! How awesome was that. We could actually move away from the loud music without worrying about what each other thought. :-D

Any-Who. Great stuff in this post.

#1 is at the top of my list. We did not get Straght Talk by our last two advisors, actually "Commissionologists." We fired both of them. Now, our CPA, she's a straight shooter and really helps us with what to talk with our Financial Advisor about.

#3 is another good one. We talk about tax implications when we're talking investments and expenses. Never did, back when we didn't have much money.

Shame most folks don't have the concept you're writing about, but at least you're putting it out there and it will reach some that will go, "Ah Ha!"

Tell Kathy hey!

Keith Schroeder

Thursday 7th of December 2017

Good to hear from you, Keith. Our conversation the last night of FinCon was the highlight of the conference for me. I didn't have to sell or anything. We could just talk without much interruption if we exclude the blaring music. Stay in touch. If I ever pass by Texas I'll look you up. Us old guys have to stick together to fend off the young whipper-snappers.

Mike at Balanced Dividends

Monday 27th of November 2017

"Non-wealthy investors are impressed by before tax results. Wealthy investors want to know what they keep after taxes."

This summarized a key point of a recent post: consider balancing account types (in addition to investment types) to balance life's unknown milestones.

I also liked that you covered expectations (in addition to behaviors), Keith. Things do not need to be overly complicated. Certain investments or "advanced" strategies might have a place for a portion of a particular investor's respective needs, but it likely won't be the whole picture.

I'd also add to not get wrapped by the wrap. Some might find value in this service though - it a depends on what the respective individual is looking to receive in terms of services.

Overall, great post. Thanks for sharing.


Monday 27th of November 2017

This is probably the topic I have the hardest time talking to people about. The investment services field reward sales skills over financial skills. People with good financial skills typically have clients and don't need or want to take on new clients. It's really hard to find someone who is both competent and willing to advise someone with a small nest egg.

Younger people who want financial advice but aren't willing to DIY don't have many good options. It is very easy, however, to find a not good option.


Tuesday 28th of November 2017

Also, at the low end, you don't have enough capital for it to be worth getting advice. It is likely that for the pricing point you're looking at, you already know more than the advisor. If your nest egg is small, I don't think the fee is necessarily worth it - although you could save yourself some pain later by planning ahead, ie getting advice on the basis that you will be wealthy. In the beginning I think the amount of capital you have built up matters more than the extra percentage return you may generate through good advice is worth the cost.

Every extra 1% on a capital of $500k is only $5k, which may equate to less than the cost of good advice for a year or two.

WCRN - coming soon to an 8 figure club near you

Monday 27th of November 2017

It looks like I am pre-wealthy, if my conformance to the 'winners' is any indication. It's nice to get some confirmation of habits, attitudes, strategies, et. al. Fired our fee-only advisor a few years back because I hated some boutique crap we bought. We've done well being all-in stock/bond index. The only 'bad' thing I do is not have any international diversification. It's a mixture of laziness, jingoism, and bogle-worship. I'd love to be convinced otherwise.... I am interested in paid-for-real-estate but being handy enough to frame, wire, and plumb my house (I'm still working on the damn thing) I don't know if I ever want to have to build, maintain, or repair a house in my life. Index funds know no vacancies and change no Harley oil in the living room. Speaking of bitcoin.... I've accidentally thrown away enough of that to buy a couple Rolex's.... Even a bullet-proof unhackable paper wallet can still be thrown out by your wife who 'is sick of all these papers'.

Great article, appreciate it.


Monday 27th of November 2017

On Tax Loss Harvesting: Like a lot of people chasing FI, we signed up with Betterment shortly after MMM ran his experiment some years ago. While we've had a good experience, the tax lost harvesting hasn't been as valuable as we would have hoped. Had we been less ignorant at the time, this wouldn't have come as a surprise. Looking back, we wish now that we would have just gone to Vanguard directly instead of using an intermediary for the same funds. Live and learn. Move on. Ask more questions next time.