Most people rely on financial advisors for advice

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mptfan
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Most people rely on financial advisors for advice

Post by mptfan »

Out of all the sources of information available to people who save for retirement, 40 percent of respondents to the EBRI survey said that advice from financial advisors is the most helpful source of information regarding investing for retirement.

http://www.ebri.org/pdf/briefspdf/EBRI_IB_04a-20075.pdf

(See pages 14-15)

This was BY FAR the most popular response. The second most popular source of information regarding investing for retirement was family and friends (18 percent) followed by written material from the employer plan (15 percent). Information available over the internet was only 6 percent. There was no category listed for information available from reading books!
yobria
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Post by yobria »

Who needs books? My broker takes care of all my stuff. I'm sure he's looking out for my best interests- we're golfing budding after all. And he works for one of those national brokerages so he must know what he's doing. You should have seen the past performance chart on that growth fund he just bought me....

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Randy
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Post by Randy »

I am starting to think that people who rely on brokers, advisors, etc do get screwed. However, they might do even worse on thier own. (Even after the x% of money they lose on commissions, fees, expenses, etc.) So maybe there is a place in this world for "finanaical advisors."
Randy
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XtremeSki2001
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Post by XtremeSki2001 »

My father is a financial planner for LPL. I'd imagine this is different then an advisor ... but our conversations are interesting nonetheless.

Personally, I'll talk to my Father about investing options and I'll use him if he doesn't slap fees on me, but otherwise, I'd prefer to do investing myself. This way, if I take a big hit, it's my fault, not my Fathers.
A box of rain will ease the pain and love will see you through
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bob90245
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Post by bob90245 »

Randy wrote:I am starting to think that people who rely on brokers, advisors, etc do get screwed. However, they might do even worse on thier own. (Even after the x% of money they lose on commissions, fees, expenses, etc.) So maybe there is a place in this world for "finanaical advisors."
I read a study (from Dalbar?) showing data that confirms your thinking. Basically, it goes like this. Left to their own devices, many investor trade too much or chase performance, etc., thus lowering their returns. On the other hand, an investor who follows their load-fund advisor doesn't trade because of the high fees involved. Thus, by being forced to be buy-and-hold investor, the load-fund investor receives higher returns than their trading counterparts.
grumel
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Post by grumel »

Normaly a load fond selling financial adviser will encourage a lot of changes to make more money from loads.
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Kenster1
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Post by Kenster1 »

But what about those that inherit a windfall or win millions?

I heard that the majority of big lotto winners that go without a Financial Planner/Advisor end up losing big time...and in fact they end up ruining their lives.

Saw a story featuring a number of big lotto cases and how the winners ruined their lives and drained their money. One couple immediately engaged the services a Financial Planner/Advisor (who in turn also enlisted the assistance of an Estate Attorney) and this couple ended up in the minority of successful big lotto cases.

On a different note...
My wife and I currently pay for the professional services of a Dietician/Nutritionist and will soon engage the professional services of a Fitness trainer. Definitely worthwhile investments.
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XtremeSki2001
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Post by XtremeSki2001 »

It's funny, some of us chastise those who pay someone to invest for them, but on the other hard, some of us pay for services that we could learn on our own (just as we have with investing).

IMHO, it all comes down to what interests you and what you have the time for.

While I enjoy reading about investing and the research that comes along with it, a buddy of mine doesn't. Rightfully so, he pays someone to manage his investments for him. Is it my right to tell him otherwise? I share with him my thoughts, but it's up to him to make the choice.

On the other side of the coin, my same friend from above asks me why I don't change my own oil. I tell him I don't care to know how and the time and money associated with it is worth the cost for me. My buddy disagrees, but lets me know his thoughts, but I make the choice in the end that's best for me.

In both situations, we're paying someone to do something we don't care to learn ourselves, but I don't think anyone has a right or place to pass judgment on anyone. After all, almost all of us pay for some kind of service we could seemingly do ourselves.

I'm not saying anyone here is right/wrong, but it's just something to consider.

Kenster really sparked my post. He made a good point, he pays for a Nutritionist/Personal trainer because he feels it's worth it and valuable. Personally, as someone who enjoys health and fitness, I don't see value in his choice, but to each their own.

Similarly, there are forums and trainers/nutritionists all over the web in forums like this that are willing to help others at no cost, but Ken sees the value in his investment, but is this a bad choice? It's up to Ken.

I see investing in the same light, each person has something they think is worth the money. For Ken it's fitness, for John Doe it's a F. Adviser, for me it's paying someone to change my oil.

$.02
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BrianTH
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Post by BrianTH »

The problem is that people often think they are getting one thing from their financial advisor, when in fact they are getting something else. What they think they are getting is advice designed to help them make the best possible investments. What they are actually getting is a sales pitch designed to help their advisor make the most money.

Of course, this is not a unique problem. It exists in part, for example, in the world of auto mechanics. You might go to them for advice on what work you need to get done, and also to do that work. That then gives the mechanic an incentive to advise you to do things you do not really need, because that makes more money for them.

So, there is no easy solution to all this. But some things would help a lot, like, for example, making loads illegal. There simply is no justifiable reason for allowing that sort of incentive for advisors to give people the wrong advice.
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XtremeSki2001
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Post by XtremeSki2001 »

I see your point Brian, but making loaded funds "illegal" crosses my line of a "free market".

One could argue that companies like BlueHippo should be made illegal for predatory practices along with all the other crappy and slimy credit institutions.

I think what's more important, rather than make illegal companies that do things that are not ethical, is to educate the public. I'm only 23, but I've never had a personal finance class, that's troubling in it of itself. This is an obvious problem, as noted by our negative savings rate as a population.

If we get public schools to add personal finance to their curriculum, this would be a huge step in the right direction. Make the PF class like gym class, you can't graduate unless you pass.

The more informed consumers become, the less successful predatory credit and financial firms can be.
A box of rain will ease the pain and love will see you through
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Kenster1
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Post by Kenster1 »

Yes you can extract bits and pieces of information to develop your portfolio but the secret lies in trying to find something simple that satifies your needs.

The health industry is very similar to the investing industry in that there are tons of conflicting information out there on "how to" do it better. Many here have mentioned that they have stumbled across the "Diehards" by chance and found their "way." But that can be hard to do when there are tons of in information out there to sort thru and not knowing which way to turn.

I'm of medium build, 175 lbs and decent shape. In fact, I probably look slim compared to the average Joe here in the Midwest that tend to be a bit overweight. The reason why we're paying for professional services is to get a better understanding of healthy eating. The fact that a magazines or books tells me to "eat a balanced diet" along with 1001 different ways to go about it doesn't help--there's no focus. Part of my reason for paying for this service is to improve/lower my cholesterol and trig levels. In general we've been doing pretty good prior to this on our own, but we've also learned a lot to fine tune our eating habits along with guidance. The face-to-face guidance & consultation is what is key.

The reason why I'm also willing to engage the services of a Fitness Trainer even though I go to the gym and am not really overweight is because I want to engage professional services to maximize my training in a better & structured manner. Even Professional Athletes engage Professional Fitness trainers all the time. I've briefly spoken to a couple of trainers and can see the knowledge and understanding they have. I'm not looking for some book to tell me to go run on a machine or ride a bike every day for 35 minutes -- or do a little of this and do a little of that everyday and you'll look like an athlete. What I want is to improve my fitness level and muscle composition in a customized program and thus achieve a better sculptured & fit body. I'm familiar with some of the services they provide and this is the value I'm willing to pay for.

I can certainly see the value of certain financial advisors especially the knowledgeable ones that have been posting on the Diehard forums but I feel that I have found my own way and that the costs/fees of an FA wouldn't outweigh the value of their services for my situation. The problem is that this industry is lavished with outlandish marketing & claims of superior performance which sheds a bad light.
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XtremeSki2001
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Post by XtremeSki2001 »

I wasn't poking at you Ken, but you just made a good example. :D

Just like some advisers are bad and no matter what, they'll all tell you something different, I think you'll find that trainers are similar.

You're body is a machine, but each persons body works differently. You may be more sensitive to carbs so your daily intake might be 30% carbs, 40% protein, and 30% fat ... while I might not be carb sensitive so I'll end up with 40/40/20 or something like that.

I'm not a trainer, but similar to you, I see many similarities in the investment and fitness fields. If you PM ME, I'll send you a link to a forum I frequent, you'll get many different opinions (just like here), but you have to do some trial and error to find out works best for you.

No workout works for everyone and most of the garbage magazine diets will leave you will less body mass, increased fat, but ultimately less overall weight.

Just like some investments may give you high returns, but come with high fees so the performance gains on the surface don't amount to as much in the end.

I think you pointed out the key to success well. You need to know someone that's knowledgeable, with experience, and a strong track record.

In personal training/investing, both an adviser/p. trainer will recognize you as a person and customize a plan that suites you. It's important if you go the route of paying for professional help, that this person knows what going on. If you do your homework (we do, but most don't), then having an adviser really isn't a bad thing after all.

Lastly, if you have the motivation and the time, I feel you can be successful at anything by DIY, but if you don't have the time, you may find it valuable to pay someone to help you reach your goals ... may it be a financial planner or a personal trainer.
A box of rain will ease the pain and love will see you through
BrianTH
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Post by BrianTH »

XtremeSki2001,

I'm not overall a big fan of regulation, but as I expressed elsewhere, I think it makes sense to regulate certain professions, including how those professionals get paid. I won't give the whole argument again, but to me it comes down to transaction costs: it would just be incredibly wasteful to make each person go through the work of contracting for reliable and ethical professional services. And I might note that this is a pro-market stance: admittedly this market is a bit less "free" from the standpoint of regulatory burden, but insofar as the regulations lower transactions costs, the market is more "free" from that standpoint.

I might also note this is all part of the rationale for securities regulation in general. Again, these rules could be laid out by contract every time people bought and sold securities, but that would impose huge transaction costs. Securities regulation thus increases the regulatory burden on the securities markets, but lowers the transaction cost burden on the exchanges in those markets.

Obviously, some balance must be struck here, but I do think it is a balance which favors a decent amount of regulation. And frankly, it works--our relatively well-regulated securities markets have made investing in this country relatively cheap, and that has been a very good thing overall.
tomeradv
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Post by tomeradv »

as most people rely on financial advisors it is important to chose the right one, after all they are the ones that are going to be in charge of handling your money. That is why it is important to choose an advisor that you are going to be comfortable with, trust and who can increase your net worth. http://www.leadsco.ca is a great way to meet with an advisor. They have many advisors from different firms who are all prepared to give you their opinions and work out a plan with potential clients. Because of the diversity in firms and approaches to investing http://www.leadsco.ca can be a great tool of you are planning on meeting with a financial advisor.
winterescape
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Post by winterescape »

Randy wrote:I am starting to think that people who rely on brokers, advisors, etc do get screwed. However, they might do even worse on thier own. (Even after the x% of money they lose on commissions, fees, expenses, etc.) So maybe there is a place in this world for "finanaical advisors."
That is not what this study said...
http://advisor.morningstar.com/articles ... docId=4482

Some highlights:
- Advisor-selected funds underperform funds that investors select on their own.
- Advisors don't help find funds that are lower cost.
- Advisors don't provide superior asset allocation.
- Estimated annual amount by which funds that people bought on their own outperformed broker-sold funds: $8.8 billion.
gkaplan
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Spam

Post by gkaplan »

This is tomeradv's first post here, and it sounds like spam.
Gordon
Morse Code
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huge difference

Post by Morse Code »

There's a huge difference between paying an extra $100/year for oil changes and paying tens or hundreds of thousands of dollars over a lifetime for advice that's readily available for free.

If people took the trouble to understand the magnitude of the costs of investment advice, I think there would be a few more DIY investors.
Livin' the dream
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