what financial advisors get you.... not much

[starboardtack]

The attached link provides access to an abstract and paper "Assessing the Costs and Benefits of Brokers in the Mutual Fund Industry" presented by authors from Harvard Business School and University of Oregon at the AFA 2006 Boston Meetings.  The study seems to indicate what many on this forum have known and practiced for quite some time.  Namely, better results seem to be obtained by selection of mutual funds and allocations by informed individual investors when compared to paid advice.       

I especially enjoy the last sentences of the abstract "Further, brokered funds exhibit no better skill at aggregate-level asset allocation than funds sold through the direct channel. This analysis implies that any benefits that exist must be found along less tangible dimensions."  What, pray tell, would be "less tangible dimensions"? 

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=616981

 

[brewer12345]

Hmmm, I suspect the "less tangible" benefots amount to hand-holding and some minor paperwork.

I think there is a crying need for more and better financial planning services. Unconflicted advice by someone trained to at least a CFP standard would be a lot better than what a lot of people currently get. Unfortunately, the financial services industry seems set up to avoid this.

 

[LOL!]

Hmmm, I suspect the "less tangible" benefots amount to hand-holding and some minor paperwork.

The abstract covered the hand holding topic, but called it "Attenuation of behavioral investor biases."

 

[brewer12345]

The abstract covered the hand holding topic, but called it "Attenuation of behavioral investor biases."

****, gotta love academics.

I think that keping people from doing stupid things is one of the best thing advisors can do. But that assumes that the advisor A) is smart enough not to do stupid things and B) not financially motivated to assist in doing stupid things.

 

[justin]

I think that keping people from doing stupid things is one of the best thing advisors can do. But that assumes that the advisor A) is smart enough not to do stupid things and B) not financially motivated to assist in doing stupid things.

And (c), has the cojones to recommend a balanced asset allocation when stocks/oil/gold/tech is returning 50%/yr and the client says "but my neighbor just bought a new 44 footer with twin engines with the money he made on oil/gold/tech last year!!!".

 

[brewer12345]

And (c), has the cojones to recommend a balanced asset allocation when stocks/oil/gold/tech is returning 50%/yr and the client says "but my neighbor just bought a new 44 footer with twin engines with the money he made on oil/gold/tech last year!!!".

Ain't that the truth. But I gess if I were to get into the advising business, my response wuld be "that was LAST year, not this year." Still, it would require the advisor not to be chasing every fee dollar and avoid pandering to bad habits (performance chasing, snake-bite, etc.).