Far out Friday: I’m an adviser, and I’m in debt

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For Tahnya Kristina (a pseudonym), managing affluent clients for a six-figure salary by age 25, sounded pretty good.

She was an adviser for a Montreal bank, and a CFP of four years. However, when it came to her own money, her management skills went out the window. She found herself with no savings, zero assets and more than $50,000 in debt.

Maintaining a lavish lifestyle and accrued student-loan debt was a part of the problem. Amid the bad spending habits, she says, there were some ill-considered work-related expenses. As a wealth adviser, there was a need to project affluence – by joining a golf club, buying an expensive watch and wardrobe.

“We were told to be at events and to go to golf clubs… and after you play golf you have to take a shower and then have an expensive dinner,” she adds. “It was awful.”

She says that when the market tanked in 2008 and commissions dried up, she considered personal bankruptcy.

There was another option though, that Kristina says more advisers need to consider.

“For financial advisers, if you are too busy to manage your own money then somebody should be doing it; if you don’t have the time to manage your own money, or you don’t want to do it, you should have an adviser,” she says.

“I’ve seen financial advisers who have $30,000-$40,000 in cash in a bank account. If they saw a client who did that they would never let that happen. But because they are too busy, or they don’t want to make a decision, or who knows what reason, they end up making mistakes with their own money.”

John Cachia, senior financial adviser for the Australian Financial Advisers Group, works with Gen Y clients like Kristina, who sometimes get themselves into debt that can seem never-ending. But after 12-18 months with an adviser, they will be out of that debt and saving for a holiday.

Cachia doesn’t have an adviser himself, but says it could be a good idea.  

“It’s like that saying about the leaky pipe, you always leave your own till last.”

Koel Loyer, associate portfolio manager and senior associate with Stonegate Private Counsel in Toronto, tries to have things both ways: he manages his own portfolio but meets regularly with his partner where they reciprocally review each other’s investments.

“I manage my own portfolio, as does [my partner], but we’re fortunate as we’re a two-person team so we review our portfolios with each other so that we’re able to get each other’s take and opinion,” he says. “It’s like the best of both worlds: I’m managing my own but every six months I sit down with Joanne and review my stuff, and on hers we meet on it quarterly.”

Share your thoughts, do you think advisers should have their own adviser?

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  • Ben (CFP) on 15/07/2013 9:50:44 AM

    Oh so because an accountant drives a 25 year old car there is a problem???? Who says he can't afford a new one? This is potentially just a perception! I drive an 11 year old car so does that mean there is a problem? Why do I? Because I can't justify spending thousands of dollars on a depreciating asset just to 'look good'. I would rather spend the money on something far more beneficial and worthwhile. There in lies the problem with today's society. If we don't own a flash car or a flash house etc then we aren't successful. What a load of rubbish! I drive an old car, have a nice home and am raising a family who want for nothing but are not spoilt! I have cash in the bank and other assets yet on the surface society would say I am not successful! Success in not all about dollars but unfortunately in this day and age this is the measure by which many judge. I became a financial adviser to help people improve their lives and standard of living and this does not always come down to money. The day society 'gets this' the sooner we will all be better off.

  • Al on 13/07/2013 3:13:57 AM

    I agree with Joy, you need to be able to show your clients that what you do for them you do for yourself and it is successful on a personal level.

    Seems those Canadian advisers live in a different world to us Aussies!

    I don't see an accountant who is struggling, I see an accountant that runs a successful firm and has all the trimmings to go with it! If he drives a 25 yr old car as he cant afford a new one then we have a problem...

  • Joy Smith on 12/07/2013 1:30:30 PM

    As owners of a successful Practice focusing on retirement planning we have always ever only done for clients what we first do for ourselves. The fact that we are financially secure (even without the value of our business) and have financially secure clients is testament to the advice we give. Our discipline with money has enabled us to fund our own Foundation to give back to the community.

    We could not envisage our business or our money managed any other way. The satisfaction and, dare I say pride, is worth our very disciplined approach to money for our clients as well as ourselves. e.g. my requirement 15 years ago that the purchase of my first new luxurious European car had to be no more than 5% of the value of our assets.

  • Martin on 12/07/2013 9:52:40 AM

    Sometimes there is a difference between a wealth/retirement specialist and a product flogger calling themselves an adviser. By all means, discuss your strategy with a trusted to ensure you do not implement a strategy that you would not implement for a client in a similar financial position. However, you should be able to identify the above crazy scenario as unsustainable.

  • Innocent Observer on 18/07/2013 2:31:51 PM

    Spot on, Ben.

    On the topic of cars;


    I'd also encourage other advisers to read "Wealth Benchmarks" by Dr. Douglas Turek (last I checked he ran a practice in Melbourne). It compiles a heap of social and financial demographic data. Provides some brilliant perspective, and perhaps adds some fuel to dispelling the myth that big home & flashy car = success.

  • Kenny on 15/07/2013 5:15:31 PM

    Love Bens comments, we should not care what we drive, the smart ones may drive a appreciating asset and the ego driven one may need to present himself as what he is not, and carry a debt on a depreciating asset. If it matters to the client, then maybe there not the clients you seek and you will not gain a strong relationship. For your foundations are on perceived success and you will always fall short on the clients expectations.
    Concentrate on your value proposition and the delivery of these services. Ensure your knowledge and sales skills are strong. Worry about your car when you can pay cash for 2 on them, not before:)

  • Kenny on 15/07/2013 5:10:02 PM

    Dont agree really, maybe we should not be advising if we cant manage our own money. When i started, I was always myself and it was not the car, it was me in a subaru ute!
    My view is that you present honesty and value. Thats integrity. Clients should not expect a 25 year old to be wealthy.
    I drive a 1985 landcruiser because its good and I dont care. I dont buy new cars anymore, I buy appreciating assets. My past new Z3 BMW means nothing, sure flashy, but really is that important. I dont have to justify myself to the public. They either want good advice or dont. Thus i drive which of the 14 cars and 12 motorcycles dating from the 1920's onwards i want to work. But mostly it the old cruiser, as frankly I dont have to care if it gets a scratch. the talk about us having 30k sitting there and not working? For most established planners with staff and overheads, then we turn this amount over per fortnight, so its not like you to need plan something special for it

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