Financial Advisors

February/25/2014 5:32AM
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A survey showed that 45 percent of so-called wealthy Americans fired their financial advisor last year. Last year was a good year for investments. Makes you wonder what that percentage might be in a down year. According to the survey, many who fired their advisor did not go to one new advisor. They diversified with more than one. Maybe a little friendly competition to see who can perform better.

That kind of client turnover is rarely seen and might lead one to the conclusion that there is a big problem in that sector. Or, big problems, perhaps.

It’s a relationship business and the wealthy tend to see it differently. Many expect performance for pay and smoozing is ignored. After all, there are indexes in every investment category. If you pay someone to invest and they do worse than an index or a number of indexed options you could have purchased from a discount broker, you wasted your money.

Here’s my take on the whole situation. Most money managers, wealth managers, or private bankers remind me of President Obama. Arrogant beyond belief with no results to support the arrogance. Most travel and are out of the office a good portion of the time. Wait, I’m paying them a lot of money to have their nose stuck to a computer screen scrubbing my investments so I can travel most of the time. What’s wrong with this picture? And, can they give you excuses. Many will hook you up in managed accounts so you get to pay twice, once to the advisor and again to the managers of the managed accounts.

There are no scoreboards in this game. There is no accountability or system to allow you to see how your person is doing vs. 10 other advisors from 10 other firms. You have to establish the scoreboards and the only ones that make sense, once again, are the indexes. If you have enough invested you will be offered tickets to golf tournaments, trips, and other perks. It takes our eyes off the scoreboard.

Billions of dollars are being collected in fees from these investment advisors. Bernie Madoff was the best thing that happened to them. It put another layer of fear in many investors. If the husband or wife is savvy enough to go to a discount broker and buy index funds, the spouse or kids or next is line may not be. So, they push to get the security of Bank of America. Bonds scare the bejesus out of most people. Don’t know how to buy them, don’t know how to sell them. Scary stuff. And, 1% doesn’t sound like much to pay someone to take all that stress out of your life. Plus, you get a new best friend.

I will tell you this. I’ve been deeply involved in this business for many years now. I’ve done it myself, I’ve mixed it up(some by me, some by the pros), and I’ve put 100% with the pros. The pros are the highest rated wealth management firms by reputation(no scorecards, remember).  I’ve always beaten the pros. I’ve estimated the hours the pros spend on my business and it’s very little.(how can you travel all the time and mind the store?).

It’s cost, service, and performance. Generally, the cost is too high for the performance. But, the performance, if you even ask, will be always great.

If you looked at the membership at the most exclusive country clubs in your community you would find the biggest majority is comprised of financial types. They are grossly overpaid. By you.

If all those rich people are firing their wealth managers every year, what do they know that you don’t know? Everything, they are paying attention and refuse to pay for poor performance. They may never find it, but they will keep looking.

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