Client Profile
A retired business owner and his spouse had accumulated significant wealth over decades of hard work. They believed they were reducing risk by working with multiple financial advisors and spreading assets across multiple firms. While that may seem prudent, a closer look showed a financial picture that, with this setup, no single advisor could see in full.
The Challenge
The couple worked with MPM Wealth Advisors while maintaining additional investment accounts managed elsewhere. They believed this arrangement provided greater diversification and protection. A comprehensive review revealed a few misconceptions in this approach.
The first: multiple advisors equal diversification. Diversification actually comes from the investments you own, not from the number of firms managing them. In this case, assets were spread across multiple advisors, but the overall strategy was not coordinated between them.
The second: someone was managing the whole picture. Because different advisors were making decisions independently, some planning opportunities were easy to miss. Tax management, portfolio construction, income planning, and long-term wealth transfer strategies were being handled account by account rather than through one comprehensive plan.
The third: more advisors mean more oversight. In practice, the opposite can be true. Without a coordinated strategy, multiple advisors can create overlapping investment approaches, added complexity, higher overall costs, unnecessary tax consequences, and less clarity about who is responsible for which recommendations.
What We Discovered
During a review of the household's tax return and investment accounts, we identified several inefficiencies. The largest issue was a mutual fund portfolio that generated significant taxable capital gain distributions despite the clients not requesting income or making investment changes themselves. Those tax consequences occurred simply because of how the investments were managed. The analysis also revealed higher internal investment costs, greater portfolio turnover, reduced tax efficiency, concentrated exposure to certain segments of the market, and a lack of coordination between advisors, investments, and tax planning efforts.
The MPM Approach
Rather than recommending a disruptive overhaul, we developed a coordinated, long-term implementation strategy. The recommendation focused on consolidating oversight of overlapping mutual fund holdings, creating a clearer division of responsibilities between advisors, improving tax efficiency, reducing unnecessary portfolio costs, aligning investment decisions with the family's broader wealth management goals, and coordinating planning decisions with the clients' certified public accountant (CPA).
Most importantly, the conversation helped the clients understand the difference between multiple accounts and true diversification, which is achieved by allocating assets across different markets, company sizes, asset classes, and risk factors, rather than simply spreading money among different firms.
The Outcome
The clients gained something that is often missing when multiple advisors are involved: clarity. For the first time, they could see how all of their accounts worked together and where inefficiencies were being created. The review highlighted opportunities to improve after-tax outcomes, reduce costs, simplify decision-making, better coordinate financial planning efforts, and create a more intentional long-term strategy for retirement and legacy planning. Most importantly, they gained a framework for evaluating their wealth based on their entire financial life rather than a collection of unrelated accounts.
Key Takeaway
Having accounts at multiple firms is often mistaken for diversification. It isn't. Without coordination, multiple advisors can lead to conflicting strategies, inefficient portfolios, higher costs, unnecessary taxes, and missed planning opportunities. True diversification comes from a thoughtful, evidence-based investment strategy. True wealth management comes from ensuring every account, every investment decision, and every professional advisor is working toward the same goal.
Compliance disclosure: This case study represents a real client situation, but all names, identifying details, account values, and other personal information have been modified or omitted to protect client privacy. Individual results will vary. MPM Wealth Advisors provides investment management and financial planning services. MPM does not provide legal, tax, or accounting advice. Clients should consult with their attorney, CPA, and other qualified professionals before implementing any planning strategy.