The Money Show (aargh!)

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The Money Show (aargh!)

Postby Call_Me_Op » Sun Nov 21, 2010 11:55 am

I posted on this once before. Some of you may have listened to "The Money Show." The hosts are strong advocates of actively-managed funds, and dislike index funds. I don't get it. Which of the following do you think applies:

1.) They don't understand the research.

2.) They understand the research but choose to ignore it.

3.) They have their own poorly-done research that is guiding their opinions.
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Postby ObliviousInvestor » Sun Nov 21, 2010 11:58 am

Who are their primary sponsors?

Edit: Never mind. She's a commission-paid financial advisor it appears: http://www.kaplan-financial.com/new/Kap ... efault.asp
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Postby Call_Me_Op » Sun Nov 21, 2010 12:02 pm

Hi OI,

OK, so you think she gets a commission on certain funds but not others?
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Postby ObliviousInvestor » Sun Nov 21, 2010 12:10 pm

Call_Me_Op wrote:Hi OI,

OK, so you think she gets a commission on certain funds but not others?


Exactly. Working as a commission-paid advisor almost necessitates the use of actively managed funds because those are the ones that charge sales loads (and therefore provide commissions).

Edited to add: She could just use ETFs to construct portfolios--and charge commissions on the transactions. But once an advisor concedes that active management provides no value and that minimizing costs is the way to go, why would a client want to pay a high commission for the same ETFs that he/she could get commission-free at Vanguard, Fidelity, or Schwab?
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Postby Call_Me_Op » Sun Nov 21, 2010 12:14 pm

ObliviousInvestor wrote:
Call_Me_Op wrote:Hi OI,

OK, so you think she gets a commission on certain funds but not others?


Exactly. Working as a commission-paid advisor almost necessitates the use of actively managed funds because those are the ones that charge sales loads (and therefore provide commissions).


Hmmm...she does discuss no load funds a lot, but you could be right. I know she likes the American Family of funds. Perhaps some of these carry a load.
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Postby JW Nearly Retired » Sun Nov 21, 2010 12:15 pm

Call_Me_Op wrote: She is a financial advisor, but I don't know if the show is sponsored by any mutual fund companies. I don't hear any advertisements that would imply that.


Quick goggle says.....
Susan Kaplan is the president of Kaplan Financial Services in Newton, Massachusetts.

Many/most of these investing shows are not radio shows in the usual sense. They are "infomercials" that the participants use to advertise their services. They will of course recommend their services as the greatest. The whole show is one long paid for advertisement.

There are rare exceptions but I don't know this show is one. Do you hear any traditional commercials during the show?
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Postby ObliviousInvestor » Sun Nov 21, 2010 12:16 pm

Call_Me_Op wrote:I know she likes the American Family of funds. Perhaps these have a load.


I'm going to guess that it's American Funds that she recommends. And, yep, they charge a sales load.
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Postby DesertOasis » Sun Nov 21, 2010 12:17 pm

2.) They understand the research, but choose to ignore it. I have heard them claim that there are studies that show that active management beats passive management, but they never stated the source. Stopped listening to the show a long time ago.
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Postby Call_Me_Op » Sun Nov 21, 2010 12:17 pm

JW Nearly Retired wrote:
Call_Me_Op wrote: She is a financial advisor, but I don't know if the show is sponsored by any mutual fund companies. I don't hear any advertisements that would imply that.


Quick goggle says.....
Susan Kaplan is the president of Kaplan Financial Services in Newton, Massachusetts.

Many/most of these investing shows are not radio shows in the usual sense. They are "infomercials" that the participants use to advertise their services. They will of course recommend their services as the greatest. The whole show is one long paid for advertisement.

There are rare exceptions but I don't know this show is one. Do you hear any traditional commercials during the show?
JW


I do hear traditional commercials, for things like home health care.
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Postby JW Nearly Retired » Sun Nov 21, 2010 12:25 pm

Call_Me_Op wrote: I know she likes the American Family of funds. Perhaps these have a load.

They sure do. Any American funds that the FA (saleperson) peddles will be like 5.75% up front load to him/her and another 0.25% 12b1 fee to them every year after that. And then the FA will want another 1% a year or more for managing your portfolio in such a helpful way.
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Postby nisiprius » Sun Nov 21, 2010 12:37 pm

Well, sure, John C. Bogle's advocacy of index funds is self-serving. And I do take that into account when I read what he's written. My personal judgement is that he is honest, he presents a lot of data to back up his opinions, and I think it is striking that he has consistently updated the data in his recent books through 2010 even when the updated data doesn't support his argument as well as the old data. But he has both a financial interest and a strong ego-involvement interest in index funds. So I leave my BS detector turned on when I read John C. Bogle. But in fact it never ticks. He is in my personal opinion more of a disinterested seeker of truth than certain academics who shall remain nameless.

As to the merchants of active funds, I do not know how to analyze their thinking and their motives. There isn't a good deal of interest in intellectual honesty among salespeople; in most cases it is probably not that they know better, but that truth or falsehood is just considered irrelevant. It's not to their advantage to know what is or isn't true.

There was a very interesting thread a few months back about registeredrep.com, a forum on which investment salespeople chat with each other. Discussions of whether it is more effective to appeal to the client's fear or his greed, for example, that sort of thing. Words are just a way of making the cash register ring; the idea that they might convey meanings, that the meanings might be testable, and that it might be worthwhile to know truth or falsity just doesn't come into it.

In "The Music Man," the con artist Harold Hill swindles small towns, pretending to be a professor of music who will organize and lead a boys' band, collecting money for instruments and uniforms and then leaving town. When little Winthrop, betrayed, asks him how he can do it, Hill says "I always believe there's a band, kid."

As long as a salesperson is not aware of telling a flat outright lie, he sees no problem. Telling a half-truth and believing it is not only not seen as dishonest, it is seen as a cornerstone of the salesman's art.
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Postby JW Nearly Retired » Sun Nov 21, 2010 12:39 pm

I do hear traditional commercials, for things like home health care.

It's clever of them to sneak in a few of these. Makes it less obvious what's going on.

Even if these folks are entirely legit and sincere, my attitude is as rrosenkoetter states in another thread..... "1% doesn't sound like much.... but when you can only withdraw 4% a year safely, giving 25% of your retirement income to your advisor is pure madness..."

I do love this quote. Thanks rrosenkoetter.
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Postby Adrian Nenu » Sun Nov 21, 2010 1:13 pm

It's all about money not what is in the best interests of investors. These "advisors" would recommend toxic waste if it paid a fat commission.

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Postby blevine » Sun Nov 21, 2010 1:51 pm

Common theme here...

I work for an active manager. There are some benefits but I personally choose mainly to go with indexing. There are some times and types of opportunities in the market where active management is necessary. In fact that's why Vanguard has so many active funds.

The passionate debate about active vs passive is ridiculous.
The real issue is the COST of investing. If an active manager charged
a reasonable fee for their service, such as the fine funds at VG such
as Wellington (not my employer, just an example) I'd have no problem using such funds for subsets of my portfolio and many of us already do.

High Yield and investment grade bond funds, absolutely should NOT be index funds. These days Muni funds need active management. In equity, if you want a concentrated # of stocks or a tax managed strategy, or some type of active asset allocation, there are no useful or safe indices.

Personally I put my core investments in index equity funds TSM,
but periodically supplement with non-core funds such as high yield.
The fact that VG has a low cost actively managed high yield fund makes this an cost effective OPTION for me. I would not invest in such a fund a the industry norm cost (3-4 x VG's actively managed high yield fund).
The managers may beat the index at times, may lose at times, but for investments in more illiquid markets like high yield bonds, you just don't blindly buy all in the index. Small/micro cap stocks same applies and that's why VG has the Explorer fund.

Some active managers charge far more than others, and that's partly a function of economy of scale, part greed, part lack of investor education that allows them to get away with it, but I do not believe active is inherently a losing proposition. High costs are making it so.
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Postby SSSS » Sun Nov 21, 2010 1:51 pm

DesertOasis wrote:I have heard them claim that there are studies that show that active management beats passive management


Active management beats passive management overall? I'd like to hear them explain how that would even be mathematically possible. Usually people claim that only their active management is superior, which is unsupported by evidence, but at least it's not an immediate logical impossibility.
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Postby Adrian Nenu » Sun Nov 21, 2010 2:03 pm

The passionate debate about active vs passive is ridiculous.


Yes it is. Passive beats active hands down. No logical reason for an advisor to use active funds. Period. Unless the advisor is either ignorant of the passive advantage or has financial incentives to use active funds. In either case, the advisor in question cannot be a fiduciary.

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Postby blevine » Sun Nov 21, 2010 2:10 pm

Of course the advisor has incentive.

I would almost universally tell anyone NOT to hire an advisor unless they are just totally uninterested in their investments and afraid to make any decisions. And even then, better to go with a fee-only planner, no commissions nor load funds with high fees. Pay for advice, not for the wrong investments !

That's different from considering active funds for the right portions of your portfolio and at the cost VG charges. FAs use active when not appropriate and without regard to keeping your costs reasonable.
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Postby dbr » Sun Nov 21, 2010 2:17 pm

blevine wrote:Of course the advisor has incentive.

I would almost universally tell anyone NOT to hire an advisor unless they are just totally uninterested in their investments and afraid to make any decisions. And even then, better to go with a fee-only planner, no commissions nor load funds with high fees. Pay for advice, not for the wrong investments !

That's different from considering active funds for the right portions of your portfolio and at the cost VG charges. FAs use active when not appropriate and without regard to keeping your costs reasonable.


Exactly. After all, why would anyone solicit the services of a professional and not expect to pay what that individual demands to stay in the business he is in? The dilemma in my mind is that investors cannot afford to pay what advisors need to stay in business. There are those who do not agree.
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Postby Zook13 » Sun Nov 21, 2010 3:04 pm

I listen to that show (listened this morning too) and often scream at the radio (my poor wife) or feel the temptation to call in and ask some questions about THEIR OWN recommendations. I resist the temptation because I think it could get ugly quick with the host (Rick?) pretty fast.

I always love when someone calls with a portfolio question and Susan picks a mish-mosh of high expense mutual funds with a good one-year Morningstar rating.

One day I will end up calling...

There are some other local financial shows the reek of infomercial, but "The Money Show" doesn't lay it on as thick.
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Postby Zook13 » Sun Nov 21, 2010 3:05 pm

SSSS wrote:
DesertOasis wrote:I have heard them claim that there are studies that show that active management beats passive management


Active management beats passive management overall? I'd like to hear them explain how that would even be mathematically possible. Usually people claim that only their active management is superior, which is unsupported by evidence, but at least it's not an immediate logical impossibility.


That is the question that should be posed to Rick and Susan on this show. I would really love to get more on how and why they recommend than just your standard calls from the sheeples....
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Postby norookie » Sun Nov 21, 2010 3:39 pm

:D She's a performance chaser
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Postby DesertOasis » Sun Nov 21, 2010 4:31 pm

blevine wrote:I would almost universally tell anyone NOT to hire an advisor unless they are just totally uninterested in their investments and afraid to make any decisions. And even then, better to go with a fee-only planner, no commissions nor load funds with high fees.


Don't know of any of my friends or aquaintances that go it alone. These are smart, successful people who decided to cast their lot with UBS and LPL "advisors". These folks attended free lunch seminars that were advertised as providing information on our 401k choices and retirement options. There is a soft sell sales pitch at the conclusion. I have to think that for those that do decide to go with them, it's probably a good choice. At least their savings are in a diversified portfolio instead of 50% in company stock and 50% money market. Unfortunately, fee-only planners never targeted our company.
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Postby mickeyd » Sun Nov 21, 2010 4:35 pm

A local radio "show" that I run across occasionally on the weekends has been on for years. They are only selling equity indexed annuities and they never accept calls from the public "on air". The announcer says that reps are currently available to take your "off the air" calls now.. They must be selling a lot of that EIA crap since they have been on the air at least 4-5 years every week.
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Postby Call_Me_Op » Sun Nov 21, 2010 6:51 pm

Zook13 wrote:
SSSS wrote:
DesertOasis wrote:I have heard them claim that there are studies that show that active management beats passive management


Active management beats passive management overall? I'd like to hear them explain how that would even be mathematically possible. Usually people claim that only their active management is superior, which is unsupported by evidence, but at least it's not an immediate logical impossibility.


That is the question that should be posed to Rick and Susan on this show. I would really love to get more on how and why they recommend than just your standard calls from the sheeples....


I called once and started to challenge Susan on some issue, and as you predicted - I was quickly shown the door. I highly doubt they would (could) hold a civil debate on the mathematical feasibility of their claim that active management is superior to indexing. They are perfectly happy to converse with you provided it is clear that you know absolutely nothing and they know absolutely everything.
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Postby CompareContrast » Sun Nov 21, 2010 10:10 pm

There's another angle that consumers of the financial media should be aware of. Once you've dispensed the best investment advice, there's not a lot to talk about.

To wit:
Choose a balanced mix of stocks, bonds and possibly international exposure. Choose a low cost index fund. That would be Vanguard, with some exceptions (eg Fidelity's Spartan lineup). Have a nice day.

Ok I exaggerate, but only a little. The best strategy for most people who don't want to make stock picking a hobby simply won't provide enough material for a weekly radio show or monthly investment magazine.
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Postby Call_Me_Op » Mon Nov 22, 2010 6:58 pm

CompareContrast wrote:There's another angle that consumers of the financial media should be aware of. Once you've dispensed the best investment advice, there's not a lot to talk about.

To wit:
Choose a balanced mix of stocks, bonds and possibly international exposure. Choose a low cost index fund. That would be Vanguard, with some exceptions (eg Fidelity's Spartan lineup). Have a nice day.

Ok I exaggerate, but only a little. The best strategy for most people who don't want to make stock picking a hobby simply won't provide enough material for a weekly radio show or monthly investment magazine.


No question. The entire (quite profitable) financial services industry is built-up around the premise that the average person is confused. It is in their best interests to keep it that way.

That some people would pay 1% (say 10K/year) to have someone else pick their mutual funds, but then break their back mowing the lawn, pulling weeds, raking leaves (perhaps picking up a deer tick or two in the process) and shoveling snow to save $1K/year - is mind-boggling to me.
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Postby jvclark02 » Fri Aug 19, 2011 9:22 am

I consider it an 'informercial' and choose to not listen
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Postby Call_Me_Op » Fri Aug 19, 2011 9:30 am

norookie wrote: Her recommendations follow the Money rags top performer this year, or the last 5. FAIRX is now her recommendation. After a good 10yr run. I hope it follows Magellan.


Norookie got his wish with this one. As of 8/18/2011, FAIRX is down 27.12% for the year, verses the overall US market being down 9%.
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Postby 1x85zn » Fri Aug 19, 2011 11:11 am

Maybe you should write and complain to the show...
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Re: The Money Show (aargh!)

Postby scottpottery » Sun Jan 06, 2013 9:32 am

Susan Kaplan DOES recommend Index funds. Also, she recommends that callers use Fidelity or Schwab. The funds she recommends are excellent; the show is NOT an infomercial. Over the years, her advice heard on the 96.9 radio station has been invaluable to me.
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Re: The Money Show (aargh!)

Postby brainstem » Sun Jan 06, 2013 12:11 pm

[Inappropriate comment removed by admin LadyGeek]
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Re: The Money Show (aargh!)

Postby Call_Me_Op » Sun Jan 06, 2013 12:49 pm

Brainstem,

Your assertion is incorrect. In any case, the show has just gone off the air.
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Re: The Money Show (aargh!)

Postby Call_Me_Op » Sun Jan 06, 2013 12:50 pm

scottpottery wrote:Susan Kaplan DOES recommend Index funds. Also, she recommends that callers use Fidelity or Schwab. The funds she recommends are excellent; the show is NOT an infomercial. Over the years, her advice heard on the 96.9 radio station has been invaluable to me.


She likes active funds better - but prefers index funds over ETFs. Her advice is generally good though. The show has gone off the air as of last week. I enjoyed the show myself.
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