• Matt Morizio

Should you mix friends and finances?


What’s the first quality you look for when hiring a financial advisor? What’s that one non-negotiable?

Trust.

I hear it every day. And I couldn’t agree more. Would you ever give your money to someone you didn’t trust? Of course not.

And presumably your friends are some of the people in your life you trust the most. So that box gets a big check.

But what about crossing that business and friendship barrier? Isn’t it smart to keep your friends and your finances separate?

I guess that depends on your friends...but my argument is no. You want an advisor who treats your money like it is their own. And who is going to feel more responsible for your money than someone who is emotionally connected to you?

Consider the unfortunate but unavoidable scenario where your investments lose value. Your friend will feel that pain alongside you much more viscerally than someone you only have a professional relationship with, and they will work harder to right that ship.

And what about those financial situations in your life that you see as “minor?” Are you really going to “bother” your advisor with questions about car loans, HSA accounts, or home mortgage rates? You should, but you probably won’t. But if your friend, who is also your advisor, is over for dinner, aren’t you more likely to run questions like that by them?

And aside from the money made/saved from the “minor” advice your friend gives, you will learn a lot about how to solve financial problems.

And I’ve learned that knowing how to think about money is so much more valuable than being told what to do.

That doesn’t mean you should work with a friend just because they are a friend. If they aren’t a very good financial advisor, or their investment strategies stink, then do not work with them.

There’s no level of trust that can overcome incompetence. You may end up losing money AND a friend by the end of it.

But assuming your friends are the types of people you deeply trust, and assuming you associate with top performers in their respective industries, then working with a friend will be far more rewarding than working with an acquaintance.

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Investment advice offered through Beck Bode, LLC, a fee-only Registered Investment Advisor in the Greater Boston area.