Do you currently invest your money with a close friend or a neighbor? Has this person butchered your portfolio through the ups and downs of the market, but you’re afraid to say anything because of the close relationship you have? Is this personal connection blinding you to reality and interfering with the achievement of your financial security?
The majority of advisers are highly skilled sales people who focus on managing relationships not investments. Oddly, instead of there being a strong focus on investment management most advisers seem preoccupied with relationship management as a core business strategy.
The investment industry is geared toward rewarding sales people to sell; not to reward know-how and integrity. Sadly, I have realized the industry places more emphasis on hand-holding and relationship building than on competency and skill. Hand-holding and frequent phone calls will not get back all your money that has been lost. Your adviser may be a nice person but may also be extremely incompetent.
It takes more than a thoughtful sales person to get the job done. Are you looking to have a personal friendship with your adviser or a business relationship with a professional that manages your money? Do you want someone who is touchy-feely but couldn’t find their own backside with both hands; or do want a serious practitioner? Are you more concerned about your adviser’s future or yours and your family’s future?
Great take on a difficult topic.
I’ve talked to numerous financial advisors, and I’ve found that most of them have very similar investment strategies, which differ little from the strategies I’ve seen in books on investment. The formula goes: given your age, you put this much into small cap, mid cap, large cap, etc. I really don’t see the point in turning my hard-earned money over to a financial advisor when I can follow this standard formula myself, and avoid paying the commissions and fees. Also, a few money managers have treated me like I’ve just fallen off the turnip truck. They’ve recommended high-commission annuities, without disclosing the killing they’re making on the commission. I’m not saying all financial advisors are bad, but if they can’t do anything more sophisticated than what I’ve read in books for beginners, then their services aren’t worth what they’re charging.
This is very true! Many advisers I have come across are very nice people but do not have the knowledge and insight that you would expect. I would rather have an adviser that can’t play golf than one who doesn’t understand what he is trying to sell me.
Matt,
I could not agree more. If I want unconditional love, I’ll buy a dog. We hear the terms manage the relationship and hand-holding but what about just doing your job as an investment professional and keeping me out of harm’s way?? When the market is up the adviser takes all the credit and when the market is down we hear nothing but excuses and of the difficult investment environment. Where is the accountability?? I don’t need to be paying someone an extra 1-2% for a buy and hold strategy. It seems that many of these “professionals” are more concerned with their own revenue not my well being. I appreciate your candor.
Jim
Great article. There is little transparency and alot of hidden fees and commissions with many financial advisers. Most people would not continue to seek advice from unqualified doctors, lawyers, accountants,ect. as the consequences can be devastating. Why not expect the same from a financial adviser.
I think it is ok to invest with a neighbor or friend but one should not feel obligated to stay investing with them because of their relationship. There have been too many people who have lost a large amount of wealth over the past year and are not willing to take the initiative to search for other advisors because they do not want to hurt anyone’s feelings. I hope enough people read your article and do themselves a favor and start taking their future into their own hands and get a second opinion.