Should You Keep Secrets From Your Financial Advisor?

The economy may be humming along strongly, but many Americans appear worried about their finances. For those seeking professional advice, a longstanding question often arises – Do financial advisors need to know everything? Or is it ok to keep a few secrets?

For many people, hiring a financial advisor may feel like seeing a psychologist or a life coach. The more transparent people choose to be with their advisors, the better they can help. 

Sometimes, it can be difficult for people to know when they are oversharing or getting off-topic with their advisor about all manner of things. Some people may not open up enough, yet the opposite can be true. 

Many financial professionals have stories of clients who open up fully and others who tend not to share information unless they’re asked, and, even then, may be reluctant to do so. The experienced financial advisors contributing to this article offer their tips on what’s most important to share, and when it’s ok to hold back.

Getting to Know You

As with all journeys, financial advice starts with baby steps. The first meeting with a prospective advisor may be mostly about getting familiar with one another. 

‘When meeting with a financial planner for the first time, the conversation should be about almost anything but money,” says Daniel Yerger, President, and CCO of Longmont, Colorado-based advisory, My Wealth Planners. “At the outset of the relationship, the conversation is better spent on the “why” of wanting to talk to a financial planner,” he continues.

However, once you’ve determined you want to work with a specific financial planner, Yerger encourages clients to share as much as they can.  

“Financial planning and advice is incredibly sensitive to the details of your financial situation, and failing to disclose certain debts, sources of income, or why you’re simply not interested in implementing a particular piece of advice, can truly be the difference between making or breaking the success of your financial plan.”

Spare Me the Details

Justin M. Follmer, the founder of Coastal Wealth Advisors, likes to keep the first encounters open-ended and simply listen to his clients’ concerns. 

“The first meeting is usually a simple conversation to decide if we’re the right fit for each other,” says Follmer. “I prefer potential clients come to the meeting with absolutely nothing but their worries and questions.”

Follmer says it’s important to know the broad categories of household spending, for instance, how much is spent per month on groceries. Yet there is no need to get into the weeds of what you purchase, where, or when. 

“I don’t really care if you spend $5,000 a year at Starbucks or secretly stop by McDonald’s 3x a week because their fish sandwich is pretty darn tasty… what matters is how you allocate your earnings among the savings vehicles available to you.”  

“What you do with the rest is your business,” he adds. “Only when it threatens the outcome of accomplishing your financial goals do we need to have a deeper conversation.”

Even when sharing sensitive documents, clients should be reassured by their advisors that their personal information is safe. 

“We use encrypted, redundant cloud-based servers in addition to virtual private networks when working remotely, a full suite of additional security software applications on top of best practices to never share sensitive documents or information via traditional email attachments,” says Follmer. “In addition, we carry cybersecurity insurance and do randomized threat assessments to check for vulnerabilities.”

Security is an important feature clients must prioritize. Several speakers at last year’s Financial Advisor Summit said that advisors must review their IT security practices more critically and carefully to deal with emergent threats that have coincided with remote work in recent years. 

Walk the Line 

Jason R. McWilliams is the owner of JRM Tax & Wealth Management, an Aston, Pennsylvania-based advisory firm. He draws a clear line around what’s relevant to his process.

“I respect my clients’ privacy and confidentiality… I do not require or ask for any personal information that is not directly related to their finances, such as their health, family or hobbies unless they feel comfortable doing so or it has a significant impact on their financial planning,” he says. 

So, what is necessary to share? 

McWilliams asks clients to provide their short-term and long-term financial goals, their income and expenses, including their sources, and amounts; details about their total assets and total liabilities; and their most recent tax return. 

“We can usually move discussions around insurance coverages and estate planning to a following meeting unless those items have a more immediate planning need,” he says. 

McWilliams says his firm takes its fiduciary duty seriously and keeps client information confidential and secure through encryption tools. They also manage any conflicts of interest that may affect the client’s best interest. 

Ultimately, financial advice is very personal, and there is no one-size-fits-all approach to how you should decide what is and isn’t disclosed in the process. 

Whether you are looking for short-term coaching on a particular issue or a long-term fiduciary relationship to build a plan designed to ensure a stress-free life in retirement, clients will need to feel comfortable sharing relevant information with their advisors. Only then can advisors equip their clients with the right tools to get through the struggles and achieve long-term success.