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Is It Important for Your Financial Advisor to Be Local?

At the recent Bogleheads event, one investor had the following question:

“I’m planning to hire a financial advisor. I want somebody who can help me as I get older and possibly less able to make financial decisions and who can help my wife manage things after I’m gone. But the advisors I hear most about are people who live nowhere near me. How important is it that a financial advisor be in your local area?”

As you might imagine, the answer is, “it depends.”

How Do You Prefer to Communicate?

Firstly it depends on how comfortable you are with communicating remotely about very important topics/transactions.

For example, I personally prefer written communication rather than in-person communication for important topics. So I’ve never felt a need to meet face-to-face with the professionals with whom I work. My only communication with Austin Frakt — the coauthor of my most recent book — has been via email and phone. We’ve never met in person. And I’ve never even talked on the phone with any of the attorneys whose services I’ve used for my business. My communication with them has been nothing but email.

Alternatively, if you do feel the need for real-time, face-to-face discussions with your advisor, would you be comfortable talking via Skype? Or would you not be comfortable unless you were physically sitting in the same room as this person?

And don’t forget that if the goal for this advisory relationship is for the advisor to someday work with your spouse, your spouse’s communication preferences (rather than just your own) should be a high priority here. After your death or incapacitation, would your spouse be comfortable working with an advisor across the country, whom he/she has never met in person?

What Services Do You Need?

The question also depends to some extent on what type of services will be provided by the advisor.

For example, if all you’re looking for is portfolio management (i.e., picking an initial allocation, then rebalancing as necessary and tax-loss harvesting when advantageous), that’s a very impersonal service. Your portfolio is probably indistinguishable from the portfolios of many other investors, so the advisor will need little to no ongoing input from you about how to perform the required tasks.

In contrast, if you want your advisor to provide comprehensive financial planning services, there’s going to need to be quite a bit of ongoing communication between the two of you, so if you really don’t like doing that sort of thing remotely, a remote advisor probably isn’t a good idea.

In addition, if you’re looking for somebody with state-specific tax planning expertise, a local professional is certainly more likely to have that than an advisor many states away.

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A Testimonial:

"A wonderful book that tells its readers, with simple logical explanations, our Boglehead Philosophy for successful investing." - Taylor Larimore, author of The Bogleheads' Guide to Investing
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