Final Meeting With My Finacial Advisor.

[Outtahere]

MyDream - If I can do this you can too!! Read as many books, websites and messages boards as it takes until you reach that "AH HA!" moment.

 

[haha]

Really? Care to expound upon that??

Hello? Earth to Mars... (Finance Dude)

A customer's combined FP/fund fees say are 1.5% to 2.5% of principal. His average gross return may be 7% (maybe!). So on $100,000 invested, the FP /mutual fund gets $1500 to $2500. The customer grosses is $7000, and his before tax net is $5500 to $4500. In the $1500/5500 case, his "advisors" and the fund managers get 27% as much as he does, with no risk. In the other case, which let's remember is way better than what happend to the OP, his "advisors" actually make off with more than he does!

What a really good deal this is.

Not that you don't already know this; it's why you are in this field. What I can't figure out is why you keep defending the indefensible on this board, where no one is fooled by it?

Shouldn't you be out giving seminars in Senior Centers?

Ha

 

[saluki9]

WTF. Who mentioned any other trade than FA?

I believe in paying people for the services they provide. Every Financial advisor I have used has charged me for producing lower returns than I can achieve on my own (or, more precisely, with SWMBO). That is not a service worth paying for.

1. Other trades were mentioned because it was implied that you can't get good service from somebody who is trying to make money. That in itself is pretty foolish because I'm not aware of too many people who are in business to lose money.

2. Have you considered that some advisors work on an hourly fee? In addition, if you goal is to find somebody (and they are seeking clients) on the principle that they can beat the market then perhaps you are looking for the wrong thing in an advisor. Most will not beat the market averages. However, the average individual investor is so far from even matching index returns that it isn't funny.

In other words, the average person didn't need an advisor in 1999, a lot of people who didn't have them needed one in 2000 and 2001

 

[FinanceDude]

Yes, compensation based on beating a certain metric, and sharing the gain, instead of x percent of the total portfolio whatever the performance.

Is that a wish, or a dream? Because that's not in the NASD/SEC rulebook, as far as I know............

Sounds like you like the hedge fund approach.......the managers take 20% of the gain every year...........

 

[Nords]

Try "The Bogleheads Guide to Investing"... it talks about how to drive the car instead of delving into the theories of internal combustion engines.

More importantly at least two of those guys aren't in it for the money, have been successfully retired for decades, and have been financial education advocates for years. I've always enjoyed reading Mel & Taylor over at the Diehards board.

If Vanguard funds aren't available in Canada (I have no idea) the entire concept can be implemented with just about anybody's low-cost index funds.

 

[FinanceDude]

1. Other trades were mentioned because it was implied that you can't get good service from somebody who is trying to make money. That in itself is pretty foolish because I'm not aware of too many people who are in business to lose money.

2. Have you considered that some advisors work on an hourly fee? In addition, if you goal is to find somebody (and they are seeking clients) on the principle that they can beat the market then perhaps you are looking for the wrong thing in an advisor. Most will not beat the market averages. However, the average individual investor is so far from even matching index returns that it isn't funny.

In other words, the average person didn't need an advisor in 1999, a lot of people who didn't have them needed one in 2000 and 2001=

Saluki, you are beating your head against the wall..............folks on here care about little else other than the "my advisor couldn't beat XYZ fund, so I dumped him/her............

I am pretty stupid, though........... In 1999, I "only" took 20% of my clients equity portfolios and reallocated to bonds............ . I'm "sure" they would have done that on their own............ : : :

 

[scrinch]

Yes, compensation based on beating a certain metric, and sharing the gain, instead of x percent of the total portfolio whatever the performance.

Is that a wish, or a dream? Because that's not in the NASD/SEC rulebook, as far as I know............ Wink

Regardless of whether it is a wish or a dream, it would place the adviser in a position where his/her motivation would be completely aligned with the customer's motivation. And that is to find a better risked return than the customer would achieve by him/herself (the "certain metric").

 

[FinanceDude]

Is that a wish, or a dream? Because that's not in the NASD/SEC rulebook, as far as I know............ Wink

Regardless of whether it is a wish or a dream, it would place the adviser in a position where his/her motivation would be completely aligned with the customer's motivation. And that is to find a better risked return than the customer would achieve by him/herself (the "certain metric").

There are any number of occupations where changing the metric would help.....not just FA's.........how about if my attorney only charges me if he/she wins the case? Maybe the plumber can give me a 25% discount if the toilet he installed fails in the nect 3 years?? I am for that 100%............

I guess you can commoditize anything...........

 

[mickeyd]

Re: Final Meeting With My Financial Advisor.

Reading books, as opposed to newsletters and magazines, is a superior way to become an informed investor. Of course, reading a book requires a certain amount of commitment and perseverance in that you have to acquire the book (purchase or library), read it, understand it and perhaps read it again.

This list from diehards.org is one of the better lists that you can refer to. All of the publications will assist any of us in our quest to become a much more informed investor. http://www.diehards.org/readbooks.htm

 

[FinanceDude]

Re: Final Meeting With My Financial Advisor.

Reading books, as opposed to newsletters and magazines, is a superior way to become an informed investor. Of course, reading a book requires a certain amount of commitment and perseverance in that you have to acquire the book (purchase or library), read it, understand it and perhaps read it again.

This list form diehards.org is one of the better lists that you can refer to. All of the publications will assist any of us in our quest to become a much more informed investor. http://www.diehards.org/readbooks.htm

Agree with you 100%..............

 

[Retire Soon]

MD, if you received an average 1% return, you actually lost money when inflation is factored in. I would recommend reading this book by John bogle, the father of indexing: "Common Sense on Mutual Funds." When you get done, you'll know more than your IG advisor.

 

[F M All]

There are any number of occupations where changing the metric would help.....not just FA's.........how about if my attorney only charges me if he/she wins the case? Maybe the plumber can give me a 25% discount if the toilet he installed fails in the nect 3 years?? I am for that 100%............

I guess you can commoditize anything...........

FD,

Don't a lot of attorneys do that today - not necessarily a good thing.

I suggest you get a plumber who warrants his work. I doubt you can find a toilet that will last for 3 years though......

 

[kcowan]

My Dream

I suggest you go to Morningstar. You can learn a lot about funds there. Look for funds that have an MER of under 1%. You want to start simple. Get some index funds that mirror the markets you want to participate in. Because you are in Canada, you will want some C$ exposure. The funds there are biased toward banking and resources. So you might diversify with a US index covering other sectors. The you want international exposure.

You will need a discount brokerage account to buy no load funds. TDW offer eFunds that carry low costs and perform well. Good luck. And welcome to the DIY gang.

A Financial Planner might help you set up a realistic budget and do some DRIP investing. Get one who charges by the hour and cannot sell you any products. Some of the advice here (e.g. diehards) does not apply well to your situation. Try Financial Webring.

 

[scrinch]

There are any number of occupations where changing the metric would help.....not just FA's.........how about if my attorney only charges me if he/she wins the case? Maybe the plumber can give me a 25% discount if the toilet he installed fails in the nect 3 years?? I am for that 100%............ laugh laugh

I guess you can commoditize anything...........

Why do you consider it "commoditization" to work to a reasonable performance standard? The plumber comes back and fixes the toilet if it starts leaking within a reasonable period of time. For free.

I admit that it would be difficult to define the performance standard for a FA, but the concept of doing so is not ridiculous. Aligning the motivations of the buyer and seller makes sense (but perhaps not enough dollars?).

 

[F M All]

Saluki, you are beating your head against the wall..............folks on here care about little else other than the "my advisor couldn't beat XYZ fund, so I dumped him/her............

I am pretty stupid, though........... In 1999, I "only" took 20% of my clients equity portfolios and reallocated to bonds............ . I'm "sure" they would have done that on their own............ : : :

FD, I disagree. I think many of the folks here would be happy if they felt they were getting reasonable performance for reasonable cost without having to do the heavy lifting themselves. Most seem to be pretty happy with the concept of "modest" returns for "modest" risk, and prefer to simplify their portfolios to reduce their effort.
Unfortunately, there are too many bad experiences with FAs , especially the major firms, giving relatively low returns for high cost. Probably these firms don't care, yet, because there is a huge ocean full of the "financially unwashed" but sooner or later they are going to kill the goose (that is laying their golden egg).

 

[saluki9]

Why do you consider it "commoditization" to work to a reasonable performance standard? The plumber comes back and fixes the toilet if it starts leaking within a reasonable period of time. For free.

I admit that it would be difficult to define the performance standard for a FA, but the concept of doing so is not ridiculous. Aligning the motivations of the buyer and seller makes sense (but perhaps not enough dollars?).

First, FD is correct in that an NASD licensed rep is not allowed to enter any arangement where you share in the profits of the client. In most cases that would be even worse for the client because the advisor knows that unless he "shoots the lights out" he's not getting paid. So they will be temped to take more risk than is appropriate.

SEC registered advisors ARE allowed to do this which is how hedge funds are allowed their "2 and 20" fleecing arrangement.

 

[Nords]

Maybe the plumber can give me a 25% discount if the toilet he installed fails in the nect 3 years?? I am for that 100%............
I guess you can commoditize anything...........

OK, let's torture this analogy for a while.

Doesn't it seem odd that financial advisors don't offer a warranty?

If the plumber blames my leaky toilet on high pressure or excess water minerals or my Cheese-Doodle diet, then I'd get a new plumber. Plumbers are supposed to be aware of those problems and to install toilets equipped to deal with them. Yet when our portfolio is leaking, all we hear is "What a great opportunity to buy a bigger toilet!" or "Buy a safer toilet!" or "Past results are no guarantee of future performance!"

Personally I'd take the opportunity to search for a better plumber. And I'd want my %^&ing money back from the other plumber along with an apology for incompetence, too...

 

[brewer12345]

OK, let's torture this analogy for a while.

Doesn't it seem odd that financial advisors don't offer a warranty?

If the plumber blames my leaky toilet on high pressure or excess water minerals or my Cheese-Doodle diet, then I'd get a new plumber. Plumbers are supposed to be aware of those problems and to install toilets equipped to deal with them. Yet when our portfolio is leaking, all we hear is "What a great opportunity to buy a bigger toilet!" or "Buy a safer toilet!" or "Past results are no guarantee of future performance!"

Personally I'd take the opportunity to search for a better plumber. And I'd want my %^&ing money back from the other plumber along with an apology for incompetence, too...

What is the plumber's revenue as a % of the wholesale cost of the toilet? What is the FAs revenue as a % of AUM?

 

[frayne]

Having read just the initial post I can say this only fortifies the things that Bogle relates about most money grubbers financial advisors. All I can say is run away and do it yourself. Invest in index funds and take the middle man who is lining his pockets as well as his firm's coffers with the funds of good honest and trusting people.

Years ago when I was trying to get a better understanding of the financial world I would go into a broker, banker, EDJ office, etc. in my best Saturday clothes and tell them I have this much money to invest and what in their opinions should I invest in. After hearing their suggestions as to the products they were pushing I would start asking about 12b1 fees, turnover, beta, expense ratios, etc. It was amazing the 180° turn they did when they found out I was not a neophyte.

I am not saying they are all dishonest but in my humble opinion, most would take advantage of an individual as that is what they are in a large part taught to do. Ask one question about fiduciary responsibility and watch them sweat. The financial industry is ripe for abuse of the unknowing individual. And that my friends is the unvarnished turth.

 

[Nords]

The financial industry is ripe for abuse of the unknowing individual. And that my friends is the unvarnished turth.

Granted, although they don't have a monopoly on that industry...

 

[bbbamI]

Last month, I went to our FA and had a list of questions regarding our finances. He said in his notes that he made when we last met (in March 2006) that hubby and I were fine with our investment directions (which we were). He got in a bit of a twist with my concerns and asked me what prompted me to question my investments. I replied, well gosh, times do change and I have been trying to educate myself and feel that we could do better. He asked me where I got my info....I said books, mags, internet, etc. He asked me if I read Scott Burns and I said that indeed I did. He said Scott was a journalist and didn't paint the whole picture.

I'm not trying to belittle my FA. This is just the way the meeting went.

Sooo, we put one of the investments with Fidelity and will see how that goes. I feel like I'm in the middle of a learning curve and constantly question myself. It makes me tired.

 

[Meadbh]

MyDream,

I think there is a way to buy Vanguard funds in Canada; I read something about it on the Financial Webring Forum. Do go over there; lots of Canadian content, some of it quite sophisticated. One of the posters is Jonathan Chevreau.

It sounds like you might still need some professional expertise. Take your time and do some research before aligning yourself with another financial services firm. For low MERs, do check out Philips Hager & North in Vancouver. You can check out the details of many funds, including returns and MER, on the Morningstar website.

 

[My Dream]

Well, in going over the replies to my thread it seems as though it is starting to be a FA bashing that was not my intent. I was simply telling you how I have been progressing since my retirement several months ago. I believe that everyone should be compensated for there work, I just felt that my Advisor spent too much time making excuses rather than following through on his goal to help me retire.

I had to sift through pages of this thread to truly see who was responding to my original post and to those I thank.

Now back to the original post. Another good advice that my neighbor did give me is to invest with TD Waterhouse, which I did 4 years ago. I think they have very completive rates and I'm going to use them as a comparison.

Reading books, as opposed to newsletters and magazines, is a superior way to become an informed investor. Of course, reading a book requires a certain amount of commitment and perseverance in that you have to acquire the book (purchase or library), read it, understand it and perhaps read it again.

This list from diehards.org is one of the better lists that you can refer to. All of the publications will assist any of us in our quest to become a much more informed investor. http://www.diehards.org/readbooks.htm

I going to take your advice which others have also given, but I don't think I can finish the book I'm presently reading since it's just not keeping me interested.

MD, if you received an average 1% return, you actually lost money when inflation is factored in. I would recommend reading this book by John bogle, the father of indexing: "Common Sense on Mutual Funds." When you get done, you'll know more than your IG advisor.

I finally figured that out when I read the book, Stop Working - Here's How You Can, Derek Foster

My Dream

I suggest you go to Morningstar. You can learn a lot about funds there. Look for funds that have an MER of under 1%. You want to start simple. Get some index funds that mirror the markets you want to participate in. Because you are in Canada, you will want some C$ exposure. The funds there are biased toward banking and resources. So you might diversify with a US index covering other sectors. The you want international exposure.

You will need a discount brokerage account to buy no load funds. TDW offer eFunds that carry low costs and perform well. Good luck. And welcome to the DIY gang.

A Financial Planner might help you set up a realistic budget and do some DRIP investing. Get one who charges by the hour and cannot sell you any products. Some of the advice here (e.g. diehards) does not apply well to your situation. Try Financial Webring.

I'm already invested in TD Canadian Equity, which is my neighbors advice and TDW is what I'm presently using.

My Dream,

I think there is a way to buy Vanguard funds in Canada; I read something about it on the Financial Webring Forum. Do go over there; lots of Canadian content, some of it quite sophisticated. One of the posters is Jonathan Chevreau.

It sounds like you might still need some professional expertise. Take your time and do some research before aligning yourself with another financial services firm. For low MERs, do check out Philips Hager & North in Vancouver. You can check out the details of many funds, including returns and MER, on the Morningstar website.

I'm not sure what Vanguard Funds are but I'll have to look into it.

I'm going to try to do this on my own, but will listen and value any good advice that I can get.



I'm going to try to do this on my own but value what ever good advice I can have.


My next step is to transfer the funds from IG to TD Waterhouse, I was told by TD Waterhouse that if I choice to transfer in kind, than I have to pay, up to $2000. in fees by TD Waterhouse for the paperwork. If I chose to close out the funds at IG then I stand to pay taxes on 10 years of interest, but save on the $2000. in paperwork that TD would have to do.

I'll keep you posted and look forward to more good advice.

 

[Leonidas]

I going to take your advice which others have also given, but I don't think I can finish the book I'm presently reading since it's just not keeping me interested...I'm going to try to do this on my own, but will listen and value any good advice that I can get.

It's hard to get excited about reading some of this stuff, but you have to do it if you want to make informed decisions. And not get stuck with the same horrible returns that IG gave. I reiterate what I said earlier - you have to be an informed consumer of investment products or you risk being taken again.

 

[Brat]

......you have to be an informed consumer of investment products or you risk being taken again.

Absolutely!

My Dream, don't chase high returns. Oh, maybe take a small portion of your investments to bet on what YOU think will be a champion pony, otherwise look for horses that finish in the money regularly.

A well managed balanced fund will let you concentrate on your profession and still have a good nest-egg when you retire.