How to Choose the Right Financial Advisors for Every Mile of Your Wealth Journey

“On the Mississippi River in Mark Twain’s time, there were riverboat pilots who only knew a few miles of the river. I mean, conditions changed so much, you couldn’t know the whole trip. Floods, sandbars, fallen logs… It was all a riverboat pilot could do to know his little piece of the puzzle.” - Robert Duvall as Captain Spurgeon in the 1998 movie Deep Impact.

Your lifetime wealth journey is long. There are changing conditions, twists, and turns. The problems you face will change over time. Why do many entrepreneurs insist on working with the same financial team they started with years ago? The skills needed to solve problems for a household with $100,000 of income, $1 million or $10 million are different. Protecting $1 million of wealth, $10 million and $100 million should change, because the threats to keeping those levels of wealth change. The tax code and the challenges it presents are drastically different at different levels of wealth.

Many entrepreneurs stay with their team throughout their journey, because they have trust and a relationship. Anytime things are working well, it is difficult to make a change. That challenge is even greater if you do not know when or why you should look towards something else. This post addresses these issues by breaking down the continuum of financial professionals into six levels: from those that help you get started to those who help you administer generational wealth.

Level zero - no advisor

• You are doing everything yourself, because you do not earn much or have many assets.
• You should be focused on building a modest cash emergency fund to cover the unexpected.
• You use your employer-provided retirement plan, and hopefully add to it each pay period.

This period is about getting started in a career. Online searches can provide some great answers.

Level one - first advisor

• You may seek an advisor when increasing financial complexity; for example, when adding a child to the family and wondering how to pay for its advanced education.
• Questions around life insurance and how to get the most value out of your 401k appear.
• You may be looking at buying or upgrading your home.
• You usually have less than $1 million of net worth at this level.

The advisor you hire at this level is typically either selling a product such as cash-value life insurance or charging a small financial planning fee. He or she works well with young professionals and focuses on their needs.

Level two - professional advisory team

When the scope of services or depth of advice is no longer sufficient with your level one advisor, you move to level two.

• You are likely starting or acquiring your business in this stage and have questions about how to form and fund your entity.
• You want to make sure you are protecting your personal assets, in case things go wrong with the business.
• You require someone who can work in an integrated way with your tax team or help you find another team with the skills you need for tax planning.
• You are likely dealing with $2 million or more in net worth and have lots of new challenges popping up as your financial life continues to increase in complexity.

At this level, your professional advisory team should have a deep bench of vetted professional partners for legal, tax and insurance. They should either manage assets in house or have solid external partners for that service. Our team over at Destiny Capital would fall into this category of experts.

Level three - specialty advisory team

You start looking for this team when your level two team provides insufficient services for your needs. The key difference between a level two and level three team is their subject matter expertise for your specific needs.

• Level three subject matter for entrepreneurs tends to regard major capital events related to the business such as raising capital, mergers and acquisitions or a business exit.
• A specialty firm should be able to help you understand your decision points around these decisions and what they mean for your personal wealth over time.
• Level three teams should be able to integrate tax planning and modeling into your decision-making process.
• They should also be able to bring other specialty professionals to the table so that you have vetted partners to work with.
• You are likely looking for a level three firm at $10+ million of net worth.

Entrepreneur Aligned falls into the level three specialty advisory team category.

Level four - multi-family office

A multi-family office starts to make sense when the operation of your personal wealth becomes very time intensive.

• Multi-family offices customize their work based on what your family needs and generally focus on coordinating investments, tax and cash management.
• They offer concierge services to help you employ personal staff such as assistants, household staff, second home care and beyond.
• If you need someone to help manage three properties for upkeep, ensure that your barn and horses are cared for and work on your asset transfers across three generations, you may be looking for a multi-family office.
• Multi-family offices tend to have in-house legal and tax professionals and work to be a one-stop shop for everything that impacts your wealth.
• You are typically at this level with a minimum of $25 million of net worth and a willingness to pay a fee of several hundred thousand dollars per year.

Level 5 – family office

A family office offers many of the same things that a multi-family office does with the significant difference being that you build it exclusively for your family.

• You create a separate entity and hire staff to manage all of your needs.
• You likely have accountants, investment managers and people managers all on your payroll.
• The family office is ideal for helping you safeguard and grow significant assets either for generations of your family, philanthropy, or both.
• These structures are the most rare, as they are typically aligned with $100 million of net worth.

Which level are you?

Which level does your current team exemplify? Do you need to look for a successor team? Do you have questions in need of better answers? Are there risks gnawing at your mind?

Think about the team qualifications that you need and ask your circle who they work with on matters of wealth. You can also ask us here at Entrepreneur Aligned. We know the stretch of the river where we are the best riverboat pilots and also know the best pilots for whichever stretch you are on.

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If you have a question or simply want to talk through your financial planning, we are here to help.

GET IN TOUCH WITH US: EA Quick Message or call 720-715-7570

DISCLOSURE: Jarrod Musick is an officer of Destiny Capital and Entrepreneur Aligned, a DBA of Destiny Capital. This article is for informational purposes only and should not be relied upon as a basis for your investment, business, or personal financial decisions. We recommend consulting with your wealth advisor, CPA/tax advisor and/or attorney, as applicable to your situation, prior to implementing any new tax, legal, or investment strategy. Advisory services provided by Destiny Capital Corporation, a Registered Investment Adviser.

ABOUT JARROD

Jarrod was born into financial planning and solving financial problems. With his financial advisor father Steve telling stories about finance around the dinner table from an early age, the idea that everyone has a different financial situation was always there. After an early professional career spent in nonprofit and government, Jarrod came back to his roots helping people plan and invest in 2011. Since then, he has worked with individual clients, led internal teams and ultimately became partner and the CEO of Destiny Capital in 2017. With a passion for helping entrepreneurs change the world, Jarrod ultimately oversaw the creation of Entrepreneur Aligned in 2020. With both Destiny Capital and Entrepreneur Aligned, Jarrod leads teams that help people live lives of abundance where money is simply a tool to let everyone be a positive force for the world around them. When he isn’t working with the talented teams for EA and DC you can find him chasing his twins, wily trout or a podium spot at an OCR race.