There is only one way to know if you are getting competitive investment performance. You have to select a relevant benchmark and hold your advisor accountable for beating the benchmark’s return. If your advisor consistently outperforms your benchmark you should sleep better at night.
The returns that are produced by your advisor are impacted by the performance of the securities markets. If the markets go down, there is a good chance you will lose money. If the markets go up, there is a good chance you will make money. Continue reading →
Every investor who relies on financial advisors to help them achieve their financial goals should be asking themselves how they can increase their advisor’s accountability for investment performance. Why ask the question? Most advisors go to great lengths to avoid accountability.
Here is an example. You select an advisor who convinces you to invest your assets in five mutual funds. You buy the recommended investments and you experience very poor performance over the next two years. Who is responsible for the bad performance, the funds or the advisor who recommended the funds? The advisor wants you to blame the funds so he can retain his relationship with you. He says it is not his fault the funds failed to deliver competitive performance. I disagree. The funds and the advisor who recommended them are both accountable. You should sell the funds and terminate your relationship with the advisor who sold you the funds. Continue reading →
Financial advice is supposed to be suitable if your provider is a stockbroker and in your best interests if your advisor is an Investment Advisor Representative (Financial Fiduciary). The regulations do not say the advice you receive has to be competent. This would be a stretch for an industry that has no education or experience requirements for advisors. In fact, the minimum age to be an advisor is 18 and convicted felons can obtain securities licenses. This is the industry that wants to invest your retirement assets. Continue reading →
Two years ago the most important concern investors had about financial advisors was their ethics. Could investors trust advisors to provide complete and accurate information that was free of any potential conflicts of interest? Major losses in 2008 and continuous headlines documenting scams and deceptive sales practices fueled their concerns.
Now, the biggest concern is the advisors’ ability to produce competitive performance for reasonable amounts of risk and expense. This new #1 concern is also not surprising. Four years after the 2008 stock market crash, investors are still trying to win back their losses. And, performance is their principal way of getting their assets back. Continue reading →