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Like a Phoenix the Financial Planning Industry is reborn the same as it always was! September 28, 2009

Posted by shaferfinancial in Finance.
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With all the attention going to bankers and their bad investments, little, if any attention has been placed on other investment advisers.  I thought for a moment that the financial planning industry would take a look inward and at least attempt to clean up their mess, but, alas, it  is not to be.

Let me point out several inconvenient facts:

As much as a scoundrel Madoff is, much of the selling of him was done by retail financial advisers who made significant money off of putting their clients into his investment scheme.  The press has, for the most, ignored this little bit of reality.  The vast majority of folks who invested in his schemes never met the man, did not run in the same Palm  Beach circles as him, and relied on their financial advisers for their investments.

There is no movement to force or even encourage financial advisers to go public with the actual returns from their advice.  Without some public confirmation of the results of financial advisers advice, folks are flying blind when it comes to following advice from this group.

What does this all mean?  It means there is no reason for financial advisers to change their advice one iota. And the results as documented by Dalbar and other studies is that financial advisers clients actually underperform folks who have no advisers!

Now there is some legislation which would force folks to have to talk to “fee only” advisers instead of representatives from their retirement plans that work on commission.  But, there is no evidence presented that this would improve returns for consumers.  In fact, there is no evidence that “fee only” advisers suggest anything different from commission sales people.

If you have been paying attention to this and other blogs, books, and informational outlets you know the problem is not the unscrupulous versus the scrupulous or any other such “our group is better than your group argument,” it is the whole concept of passive investing.  Hear this clearly: No one will take care of your money with the care you give it yourself.  No one will put your interests above their own.  And in the financial world your interests will never completely align with a financial adviser no matter what they claim.  If there is anything we have learned over the last decade it is this.

Saw an interesting statistic today: only 12% of workers age 30-39 are now enrolled in a defined benefit pension plan.  The rest are left to figure it out on their own or in concert with the above mentioned financial advisers.  And that should be enough to scare folks into taking control of their money.  But it won’t for various reasons and we will be seeing a very angry electorate in about 15-20 years as they approach retirement with little wealth.  Remember, the Dalbar studies have demonstrated that for the last 20 years of folks investing in mutual funds the returns are less than what would have been if people put their money into a savings account at a bank.

And you have to blame this on the financial planning industry who have been advising folks directly or through mass media [magazines, blogs, books, television, etc.].

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