in the newspaper, and online. They buy ads and write books. Men who run multi-billion dollar investment firms “advising” why you should not use a particular investment. Their pious proclamations are usually focused on the commission “your broker” made by selling you said product. They’d like you to think that they are pulling back the curtain to unveil the “great evil” of what amounts to someone making a living from doing their job. Their lack of candor is enough to nullify the credibility they desperately seek.
Everyone and every firm in the investment business makes a profit from their work. They deserve to be paid, or else they won’t be in business very long to continue helping their clients. The problem is, some folks are playing the old political game of accusing one’s competition of doing something wrong while quietly doing much the same thing themselves. What never seems to make it to the screen or page is the annual fees (a cost that is assessed quarterly and expressed as an annual percentage) that these guys charge not only on the client’s original investment but on the growth of that investment as well. Despite what these guys would like you to believe, there is no virtuous quality to a fee assessed to your assets, and there is no evil in the assessment of a commission. They are simply different ways of paying for the work your advisor performs for you. In fact, if you are a buyer and long term holder of an investment product, paying a commission may actually be less expensive than paying a 1.5-2.0% ongoing fee. On the other hand, if you have a need for an actively traded and managed account, you likely would pay less with a fee-based account than paying a commission each time you make a trade.
To the billion dollar money managers, every client account looks like a nail and they are ready with their one-size fits all hammer to fix it for them. Their disingenuous pitches are cloaked in the sanctity of books that proclaim to tell you “the truth” about your finances, but fail to address the very foundation of the planning process: “Prescription without diagnosis is malpractice“. Here’s the truth-these guys know NOTHING about you, your needs, your wants, or your desires. They have no idea whether the only source of regular, predictable, dependable income you might have in retirement is your social security check. They have no clue whether that social security payment will be anywhere near enough to cover your basic living expenses. For a vast majority of Americans, it won’t, and that same majority likely won’t have a pension to fill that gap in basic income either. Their books and TV commercials won’t tell you that one of the biggest risks a retiree faces is withdrawing money from an account that’s riding the roller coaster of the market, exposing them to the risk of running out of money before they run out of time. They would have you believe their stock-picking prowess or their low-cost market index ETF will save the day, never mentioning to the retiree that those strategies could expose one to the very risk that they can ill-afford to take when it come to the money you’ll need to pay the electric bill, groceries and medicine.
Everyone would like to find the perfect investment but the truth is, it doesn’t exist. Everyone would like to find the strategy that assures their success in retirement, but no strategy can do that. Market conditions change over time. Your life circumstances change over time. There is no substitute for a solid, long-term relationship with an experienced financial partner who walks down life’s path with you, making adjustments to your plan at each turn. Yes, that advisor needs to be compensated, but the right relationship can bring much more value to you through their advice, guidance, knowledge and service. And no one should be swayed away from the value of that relationship by a disingenuous sales pitch. That’s why I hate them (and you should too).
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.