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Why Does this Forum Distrust Financial Planners?
Old 11-19-2005, 05:17 PM   #1
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Why Does this Forum Distrust Financial Planners?

From a SmartMoney.com article on the screwing help investors can expect from financial advisors:

"...I can name 155 reasons why investors should continue to view the financial services industry as sheep would view a pack of rabid wolves.

One hundred and fifty-five is the number of investment options our fund screener spits out when asked to locate funds with upfront loads of at least 5%, annual expense ratios of at least 1% and negative annualized returns since inception. And every time I run that screen I'm amazed the software doesn't choke."


<snip>

"...the corporate spokespeople defending loads are finding it hard to see what's obvious to investor champions like Vanguard's John Bogle and millions of individual investors. In an era of exchange-traded and index funds, 5% upfront commissions are nothing but a rip-off."

http://smartmoney.com/trendspotting/...story=20051117

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Re: Why Does this Forum Distrust Financial Planners?
Old 11-19-2005, 08:26 PM   #2
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Re: Why Does this Forum Distrust Financial Planners?


So many people think they need a pro or "someone to tell me what to do". They don't want to take the time to educate themselves. They want someone else to make the moves for them.

I think there is a parallel regarding tax prep. As we all know, no matter who fills out the forms the individual is ultimately responsible no matter what the "pro" does.



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Re: Why Does this Forum Distrust Financial Planners?
Old 11-20-2005, 05:48 PM   #3
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Re: Why Does this Forum Distrust Financial Planners?

Egomaniacs automatically think they are smarter than
everyone else. Financial planners are part of
"everyone else". Simple............. in my case.

JG
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Re: Why Does this Forum Distrust Financial Planners?
Old 11-20-2005, 07:34 PM   #4
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Re: Why Does this Forum Distrust Financial Planners?

CFPsRus
Canned programs
Multicolored printouts
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Laquered hardwood conference table and plush chairs
Snappy outfitted office babe getting coffee

Lambs to the slaughter
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Re: Why Does this Forum Distrust Financial Planners?
Old 11-20-2005, 08:12 PM   #5
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Re: Why Does this Forum Distrust Financial Planners?

Swine casting for squirrels?

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Re: Why Does this Forum Distrust Financial Planners?
Old 11-20-2005, 08:36 PM   #6
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Re: Why Does this Forum Distrust Financial Planners?

"Why Does this Forum Distrust Financial Planners?"

Perhaps it's because no one can have our best interests at heart, and know as much about our own situations, as we can.
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Re: Why Does this Forum Distrust Financial Planners?
Old 11-20-2005, 11:39 PM   #7
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Re: Why Does this Forum Distrust Financial Planners?

Quote:
Originally Posted by BUM
CFPsRus
. . .
Snappy outfitted office babe getting coffee

. . .
Really? If I had known that I would have gotten a fianancial planner years ago.

Maybe I should shop for one . . . a planner, I mean.
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Re: Why Does this Forum Distrust Financial Planners?
Old 11-21-2005, 04:59 AM   #8
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Re: Why Does this Forum Distrust Financial Planners?

Quote:
Originally Posted by ((^+^)) SG
Really?* If I had known that I would have gotten a fianancial planner years ago.* *

Maybe I should shop for one . . . a planner, I mean.
Obviously, I don't have one (planner) But every time I
visit my attorney or broker, I have to wonder how these
guys can keep their minds/eyes on their work (not to mention
how their wives feel sending them off to the office). Wish I could
take some photos for the entertainment/amusement
of the DOM (Dirty Old Men) on this board. Nah.............I could
never figure out how to post them

JG
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Re: Why Does this Forum Distrust Financial Planners?
Old 11-21-2005, 07:10 AM   #9
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Re: Why Does this Forum Distrust Financial Planners?

Unable to justify the fees reaped from investors, the industry is trying to create a sense that investors just can't do it themselves. A recent brokerage commercial I saw attempts to equate investing on your own with performing surgery on yourself. Last time I checked, opening an index fund account didn't reuire a medical license.
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Re: Why Does this Forum Distrust Financial Planners?
Old 11-21-2005, 07:23 AM   #10
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Re: Why Does this Forum Distrust Financial Planners?

I think the average middle class Merkin goes to a financial planner in large part because he is terrified of the idea of managing his own money, especially when it comes to making decisions. Either that or they are convinced that this is an arrea for specialists so they have no business DIYing. A couple of examples:

- My FIL is a very sharp guy. PhD, teaches MBA courses in marketing management, scholarly and taught himself wood carving to the point where he carves museum grade carousel horses. Absolutely terrified of the thought of managing hs own money and haveing to make the decisions. I have suggested to him that he fire the leech sucking a percentage fee out of him every year, but he won't hear of it. In the interest of family harmony, I don't push the issue, although I do occasionally offer suggestions if the topic of investing comes up.

- One of my MILs (FIL remarried) is also not a dumb person. PhD in public health,, ran a state public health agency for a number of years, etc. Always had a leech sucking fees and commissions simply because she thought this was very complex stuff and you needed to go to a professional. A few years ago she asked me to calculate whether it made sense to buy more pension service credit (it did by low 6 figures in her favor). One thing lead to another and she fired her leech. I help her now, which consists of a oncce a year rebalancing/tweaking and maybe one or two brief phone discussions during the intervening year. But she is still roughly in the same place she was before: she has a professional doing it for her.
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Re: Why Does this Forum Distrust Financial Planners?
Old 11-21-2005, 07:26 AM   #11
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Re: Why Does this Forum Distrust Financial Planners?

I don't know how many people on this board have actually been taken for a ride by financial planners, but I have. *My guy had all the right designations (CFP, CPA/PFS) and sure acted like he knew what he was doing. *He was an independent, not affiliated with any of the brokers who are often complained about. *But after letting him manage some of my money for about 2 years, I took it back. *It took me almost 2 years to unwind some of the lousy investments he had me in. *I don't even want to think about how much money I lost vs. doing it all myself. *I'm just happy we didn't give him any more money to manage. *

There are so many tales like this on the Morningstar and other boards. *The bottom line is that no one cares about your investments as much as you do. *The financial planners are in the business to make money, and there is nothing inherently wrong with that - if you don't mind giving it to them and don't have the time or interest to educate yourself. * But you have to be careful and understand where your money is going. *Not all of them will do the "right thing" for you.

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Re: Why Does this Forum Distrust Financial Planners?
Old 11-21-2005, 07:30 AM   #12
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Re: Why Does this Forum Distrust Financial Planners?

Quote:
Originally Posted by BUM
CFPsRus
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Laquered hardwood conference table and plush chairs
Snappy outfitted office babe getting coffee

Lambs to the slaughter
I would like to add to that, "fancy gifts at Christmas time"...* I should have figured out if I was paying my advisor enough to get a really fancy gift basket at Christmas, I was paying him too much!!

CJ
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Re: Why Does this Forum Distrust Financial Planners?
Old 11-21-2005, 07:46 AM   #13
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Re: Why Does this Forum Distrust Financial Planners?

In a different gig I was at a Chamber of Commerce function trying to drum up business--which of course was what everyone else was trying to do--and got to talking to a financial planner. I let it slip that I had rolled my 401(k) into an IRA in (at the time) mostly VFINX. The FP explained some alternatives to me which involved moving my money into back-end loaded funds with higher expense ratios and 12b-1 fees which basically mimicked VFINX. 'Scuse me, but where's my benefit of doing that?
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Re: Why Does this Forum Distrust Financial Planners?
Old 11-21-2005, 08:08 AM   #14
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Re: Why Does this Forum Distrust Financial Planners?

We are just more comfortable doing it ourselves. The fact we Er'ed should tell you something. Also IMHO financial planners are simply sales people for their recommendations. At least that is what I have found. Fee only may be different, but "Sales people capitalize on their Comp Plans". I know I did.

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Re: Why Does this Forum Distrust Financial Planners?
Old 11-21-2005, 08:24 AM   #15
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Re: Why Does this Forum Distrust Financial Planners?

Why pay a fee? Vanguard gives all the service I need, and this board's usually on top of big changes in the investment world.
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Re: Why Does this Forum Distrust Financial Planners?
Old 11-21-2005, 08:36 AM   #16
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Re: Why Does this Forum Distrust Financial Planners?

Hmmm

Perhaps there is a social aspect to all of this.

Back in LA - I always went to the same barber.

The haircuts were cheaper and the conversation pleasant and wide ranging.

heh heh heh
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Re: Why Does this Forum Distrust Financial Planners?
Old 11-21-2005, 09:03 AM   #17
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Re: Why Does this Forum Distrust Financial Planners?

Quote:
Originally Posted by unclemick2
Back in LA - I always went to the same barber.

The haircuts were cheaper and the conversation pleasant and wide ranging.
Now your friendly local financial planner will give your portfolio a "haircut"!


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Re: Why Does this Forum Distrust Financial Planners?
Old 11-21-2005, 11:07 AM   #18
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Re: Why Does this Forum Distrust Financial Planners?

Unfortunately there are many whores in what is referred to as the "financial planning arena".* However, not all are evil nor driven by their need to generate commissions or fees.

I suspect that wether many of us will admit it or not, we have been steared in the direction of an unsavory, commission/fee-seeking practioner that has guided us into an investment that has been more financially beneficial to the planner than it has been for the customer.

After realizing that we have indeed been screwed, many folks realize that no one has their financial interests at heart more we individuals do. At that point in life, many of us have decided that we had better become a more knowedgeable investor and look after our own stuff and not pay some other goon to depend on making financial decisions for us.
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Re: Why Does this Forum Distrust Financial Planners?
Old 11-21-2005, 12:05 PM   #19
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Re: Why Does this Forum Distrust Financial Planners?

Quote:
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. . . Wish I could take some photos for the entertainment/amusement
of the DOM (Dirty Old Men) on this board.*. .JG
Take the right kind of photos and you might be able to sell them for an adult male magazine layout -- Women Admins of the Finanical Community.
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Re: Why Does this Forum Distrust Financial Planners?
Old 11-21-2005, 12:40 PM   #20
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Re: Why Does this Forum Distrust Financial Planners?

I think the problem is a notch more subtle for the average investor, and explains why not only financial plannners, but also active fund managers have been able to take, collectively, 3% of assets each year in fees. (Bogle's number).

Nothing new, but basically the problem is that most people don't know if they're doing well in an investment or not, as the benchmark keeps changing. And most people inherently feel that if a planner can steer them into 'market beating' investments, then they have earned their fee. Or that in any case, the fee isn't that much -- "1%? So what! Especially if this guy can earn me 3% over the market..."

I think it takes a fair amount of singed whiskers, thoughtfulness and maturity to come around to using a low-fee, index, asset allocation approach. It is counterintuitive for most people to not try to beat the market.

And if they think like that, then the investing world looks incredibly complex, filled with choices and the spectre of doing something stupid on your own. At least if the planner does it for you, you have someone to blame. That gets you off the hook for the one thing many people dread most of all-- looking stupid to their spouse.
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