by **Caitlyn Driehorst**

Caitlyn Driehorst is a financial advisor at RightWise Wealth, as well as the firm's founder and CEO. Caitlyn began her career at the Boston Consulting Group and held strategy roles at MGM Resorts, Capital Group American Funds and two venture-backed wealth startups. She holds a B.A. from the University of Chicago and an M.B.A. from UC Berkeley's Haas School of Business.
Published: October 2025

Five Financial Advisor Mistakes I’ve Personally Seen in Client Portfolios

You know what I can never be cynical about? What an honor it is that people show me their investing statements. My dad has been a pilot since 1983 and he says that every lift-off is still magical; I get that.

You know what does get old? Sloppy portfolios created by other financial advisors. I don’t like to badmouth compatriots; it’s a bad look, and a professional could have had a good reason to make what appears, out of context, to be an oversight or error. Investing requires humility, and I don’t want to pretend I have perfect knowledge. I’ve tried to write this list with lots of context and potential exculpation.

But last week I saw a real streak of frustrating misses, so here we go: five investment mistakes (or, at least things I’d do really differently) I’ve seen in client portfolios coming over to us from other financial advisors.

Investing conservatively rather than educating and explaining

A client in her 30s brought over a Traditional IRA that she’d rolled over with a previous advisor – and it was 50% in bonds. I’d expect to see such a conservative allocation for someone currently in retirement, not a quarter-century from qualifying for withdrawals.

Even for this smaller account, the difference over 25 years of compounding between being aggressively and conservatively invested could add up to very, very real money.

“What happened here? What conversations did you have with this advisor?” I asked my client, trying to understand.

“We didn’t really talk,” she shrugged. “He had a desk at my credit union and I asked if he could help with a rollover. It was pretty quick. I haven’t heard from him since.”

Why do we think this happens?

I called up a buddy who got his start at the same big firm whose name I’d seen on the account statement, to ask what he thought happened.

“So she was in her late 20s? The advisor probably assumed she’s new to investing, so he invested her conservatively so that she wouldn’t be spooked if the numbers bounced around in the market. We were trained to avoid investing people aggressively when they’re starting out,” he shrugged.

“But if an investor is new, they just need education. Why didn’t he just explain market cycles to her in advance, so she could be invested for a longer time horizon? Would he really have left this account 50% in bonds until she retired?”

“Caitlyn, no one is going to have a long conversation with someone giving them $25,000 to invest. That’s bad business.”

This is speculation. Maybe my client said something to the advisor that made them especially feel that they wanted to be invested conservatively. But I’m glad I caught it and could get her money better-aligned for her actual retirement time horizon. (And when the market did dip in April 2025, my client didn’t freak out – not because I’d sandbagged her account with bonds, but because we’d talked about market volatility, so she held through.)

2. Zero tax loss harvesting

Nuance upfront: tax loss harvesting isn’t always possible (for example, if a client’s funds have been held so long, they may have appreciated outside of normal market volatility) and it’s not always right for the client (for example, if they are in a lower-income year – in that case, we may be more interested in harvesting gains!)

But it’s been frustrating to see statement after statement from prospective clients who were working with advisors through April 2025’s tariff-related volatility, who are in high-tax years, who have meaningful taxable holdings and a high cost basis – and there’s no evidence of tax loss harvesting. What??

Why do we think this happens?

“OK, so I know the firm you’re talking about,” a friend suggested, when I caught up with him and was moaning about a recent account statement I’d seen. (Different buddy from my earlier point; I have a posse of investing-nerd-buddies.) “They have two systems for separately managed accounts: an old platform with no real tax loss harvesting abilities, and a newer platform with super-slick tax loss harvesting in these types of accounts. A bunch of advisors are cranky about the new tech so they’re holdouts for the old platform. Can’t know for certain but maybe that’s why your client didn’t get any nice realized losses out of April.”

Again, conjecture – though a reason that will sound familiar to anyone who has led a change management project. (Also, just noting, we invest client funds via Betterment for Advisors, a modern platform with excellent automated tax loss harvesting capabilities.)

3. “False diversification”

We frequently speak with our clients about diversification: spreading out your investments across different types of companies and types of investments, so that your portfolio is less beholden to the fate of any specific firm or factors that influence results over time.

This usually looks like investing client money across multiple funds. But just being in different funds alone doesn’t mean that you’re diversified.

Consider these four ETFs, which together comprised >90% of an advisor-created portfolio:

This client may believe that they’re diversified because their money is spread across multiple funds, but when you look at their underlying holdings, you can see that this portfolio is very concentrated. This is called “false diversification.” (Note that I have no problem with a concentrated high-conviction strategy such as “all-in on big tech” if it’s suitable and well-explained to the client – but why the overlapping funds??)

Why could this happen?

Sometimes, we see highly-related ETFs next to each other where there has been tax loss harvesting, and that’s (usually, when it’s suitable) awesome. Here, that wasn’t the case, since the portfolio was recently funded from new cash.

My honest guess here is that the motive could have been the theater of it all. It looks a little fancier to the client to have a longer list of investments in an account. If you’re charging 1% just to pick funds, well, maybe you want to show that you picked more funds.

4. Randomly having a big chunk of cash in an invested portfolio

There’s some good reasons we’ll see cash in an account: a little cash buffer can cover fees without forcing sales, and cash may be liquidated intentionally for a specific purpose, such as augmenting a down payment, and just not yet transferred from the account. And sometimes dividend reinvestment is turned off where an advisor is manually harvesting tax losses, and wanting to control for wash sales (accidental purchases within a certain time horizon that can negate part of a tax loss.)

But I get frustrated when we see a buildup of cash in a portfolio because a client deposited funds that were never invested, or when dividends have just accumulated over a year or more.

This is called “cash drag,” and it’s bad for clients because – in an investment account that’s intended to be held for a long time horizon – we’d expect cash to realize a lower rate of return than stocks or other investments.

Why does this happen?

I’m guessing that this one is just a lack of attention to detail? Many advisor billing systems exclude cash from a billable balance so there’s not even an apparent profit motive. Hit me up if you want to join my nerd-posse and give me a better guess.

5. Opening a direct indexing account (neat!) and then buying more of a client’s heldaway stock (what?)

We love working with clients who have big concentrated stock positions, usually from unsold employer stock compensation. For example, they may have $750,000 in unsold Adobe stock, or a few million in unsold Apple stock.

For these clients, separately managed accounts (“SMA”; similar to direct indexing) can be a nifty solution: this lets you invest in an index, such as the S&P 500, by purchasing representative individual underlying stocks AROUND the client’s existing holdings.

This is especially important today for clients with tech holdings, since we see indices becoming so concentrated. In October 2025, Apple is ~7% of the S&P 500; if you already hold a lot of Apple, you may not want to buy the index right off the shelf and hold even more Apple, increasing the risk of your portfolio. (As your mother told you, “Don’t put all your eggs in one basket.”)

So why would an advisor open an SMA account for a client who has a large concentrated single-stock position… and then not exclude the ticker of that concentrated stock position? Instead, knowing that the client has a large holding, they’re purchasing more of that stock within the SMA? Why buy more if the client already has too much? (This was a tax-protected account, so I know the advisor hadn’t transferred in extant shares but had instead purchased them in the account.)

Why does this happen?

I try to come up with honest potential explanations, but this one, I’m stumped for any answer other than oversight. Big single-stock positions are sometimes held on other platforms (such as E*trade or Fidelity, where that grant originally landed) and so perhaps the advisor didn’t remember the client’s larger context when opening a new account from cash? To me, this illustrates the importance of integrating financial planning and investment management, and really knowing your client without needing their file open in front of you to remember where they work.

Conclusion

In writing this post, it was important to me that I provide lots of nuance and context for each item, but here’s an area with zero grey, where I will make a high-conviction blanket statement: you know who is never, ever at-fault in these circumstances? Clients.

“Should I have known? Did I miss something? Was I wrong to trust this person?”

It makes me so sad and frustrated when clients feel guilty or shame when they find out they didn’t receive the work they’d hoped for from a prior advisor.

I try to focus on the good they received: I point out where I see low-cost funds, tax-efficient ETFs, an appropriate allocation. We celebrate that they’ve been saving, that they’ve prioritized their future.

But I do take pride that our firm has a strong focus on relationships and implementation, that we value not just answers but also advice, conversation and education. We work together on client situations and collaborate so that everything from tricky technicalities to mundane operations can benefit from multiple pairs of eyes.

I’d love to put eyes on your portfolio. If you’re interested in a third party opinion, reach out for a discovery call; I’d love to tell you what I see in your investments.

Book a call with Caitlyn here