I ran across this very interesting link over at Vanguarddiehards. I'm sure many of you saw it also.
I have not seen the study however, it should be a real eye-opener to many of the investing public who place blind faith in an advisor and never question his "recomendations."
One thing that I learned in the article is that I am a "direct channel" investor. Damn, another euphemism to keep up with!
The authors asked these essential questions:
1. Do advisors give clients access to funds that are harder to find and evaluate? The answer is yes, but as you will see, as a whole, advisor-selected funds underperform funds that investors select on their own.
2. Do advisors help clients find funds that are lower cost (excluding distribution costs)? After analyzing several trillion dollars worth of transactions, the answer is no.
3. Do advisors give clients access to funds with better performance? The answer is a resounding no. I know this is shocking--and it may not apply to you. But the scientific evidence shows that many of the other advisors in America not only underperform indexes--they underperform what most people do on their own if they don't have an advisor.
4. Do advisors provide superior asset allocation? After years of research covering trillions of dollars of asset allocations, the finding is that advisors do not provide superior asset allocation. Even without this study, one only had to look at how advisors overemphasized technology funds in the late 1990s and how many advisors are overemphasizing energy, gold, and foreign funds today.
5. Do advisors help correct bad investor behavior such as chasing fads and chasing performance? The sobering answer is no. In fact, the evidence shows that advisors even contribute to such behavior. Again, look at all the money advisors are pouring into energy, gold, and foreign funds.
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