The Advice Business Needs a Serious Fix

RES_0614_AnnuityAnalytics-resize-600x338The latest edition of Research magazine is out it includes my monthly column, as usual. The set-up follows.

We all recognize that there are a number of areas in life where the purported answer we receive depends almost entirely upon the person to whom the question is asked. If you ask a Chevy salesman for a car recommendation, it isn’t likely that you will be pitched a Ford.

After a political debate, the various support teams race into the breach in order to “spin” the event in their favor. Each respective “good guy” is deemed to have done better than expected while the “bad guy” is said to have been disappointing. Of course my candidate won.

When The New York Times asks someone already on record attacking what she sees as Duke University’s poisonous athletic entitlement culture to review a new book on the Duke lacrosse case that tries to make that very case, it is hardly surprising that she finds it “a masterwork of reporting and a devastating critique of a university that has lost its way.” When all you have is a hammer, everything looks like a nail.

But if you ask a real professional for professional advice, you rightly expect a different sort of answer, one that doesn’t differ based upon whom you ask. If you were to visit 10 doctors for a broken leg, you wouldn’t (and shouldn’t) expect their treatment protocols to vary very much. You rightly expect advice that is real and true, advice we can rightly describe as “unbiased.”

That’s why it’s so disappointing that so many financial services clients routinely get nailed when they seek financial advice from an industry that badly wants to be seen as professional. We do not have even a rough outline of what our best practices should be in a wide variety of common situations.

If you were to ask 10 financial advisors (broadly defined) for help in any number of given situations, their advice and recommendations would almost surely differ wildly.

As always, I encourage you toi read the full piece and the entire issue.

The Advice Business Needs a Serious Fix

Top Ten Benefits Of Financial Advisors, Besides Investment Returns

Thank YouAs I have noted here many times, I am a big fan of Michael Kitces and his blog, Nerd’s Eye View.  If you aren’t a regular reader of it, you should be.  Michael is my “go to” guy for financial planning issues and concerns.  He is as talented and knowledgeable as they come.  That’s why I was so pleased that he asked me (unlike yesterday) to allow him to use my Financial Advice: A Top Ten List as a guest blog post.  I was honored and (of course) agreed.  The link is below.  Thank you Michael.

Top Ten Benefits Of Financial Advisors, Besides Investment Returns

Math Suckage and Dave Ramsey

Dave RamseyDave Ramsey has added further evidence to the pile already in place attesting to how bad we are generally at math and probability.  Sadly, he’s no better than the mass of us.

Let me hasten to emphasize up-front that Dave has done some fabulous work by helping many, many people to get out of debt, stay out of debt, budget effectively, live frugally and save aggressively.  But when it comes to investing and to doing math, he is simply out of his depth.  Let’s start with the backstory. Continue reading

Senior Protection

Al DavisAs part of my Financial Advice: A Top Ten List yesterday, I emphasized the value that an advisor can provide by protecting seniors from making mistakes or being defrauded.  That (summary) point deserves some additional commentary.

As I noted, research confirms what most of us have seen among our families and friends.  Simply put, the ability to make effective financial decisions declines with age, often rapidly.  Continue reading

Financial Advice: A Top Ten List

Dilbert - Index FundsYesterday, while I was otherwise engaged, Josh Brown threw some fuel on the active v. passive fire:

“Active investors, in the meantime, really can’t say anything. There isn’t a single empirical datapoint backing up the idea that an investor is financially better off paying someone to pick their stocks for them. There are other considerations in favor of active managers – mostly emotional ones involving elbow-rubbing, fancy lunches and alerts – but we’ll leave those aside for now.”

Putting aside the actual substantive argument (my views, including why I advocate some active management, are here and here), advisors routinely tell me that if they used index funds, their clients wouldn’t need their services, consistent with the Dilbert cartoon above.  I disagree vehemently.  Here’s my top ten list of reasons why. Continue reading

Unintended Consequence

Unintended ConsequenceLIMRA recently surveyed 2,000 Americans to gauge their knowledge of basic financial and retirement topics.  Not surprisingly, the respondents didn’t do very well.

However, the study did disclose that those who work with a financial professional were more likely to have a higher level of financial literacy. More specifically, consumers who use advisors are more likely to save for retirement (78 percent versus 43 percent), are likely to save at a higher rate (61 percent versus 38 percent) and feel more confident that their savings will last throughout their retirement years (71 percent versus 43 percent).  Even so, 8 out of 10 respondents say they only would pay $100 or less for financial advice. Continue reading

Sunday Sermon

do well do goodI’m going to preach today.  Don’t say you weren’t warned.

For the love of money is a root of all kinds of evil…. (1 Timothy 6:10)

Most of us are aware of this text, at least conceptually.For those of us in the money business, its warning is particularly poignant.  Is money your motivator or merely a tool?  Why do so many corporate executives pay themselves obscene amounts of money, often to the great detriment of their firms?  Because money is how they keep score.  I suggest keeping score in other ways.  What do your spouse and kids think of you?  What do your employees think of you?  What does your community think of you? Doing good is the best way to do well. Continue reading

Fuzzy Political and Investment Math

The great scientist E.O. Wilson created a major stink over the week-end via The Wall Street Journal by arguing (or at least seeming to argue, among other things) that math skills are less important to most scientists than imagination, theory, concept and intuition.  It reminded me of the 1976 SNL send-up of the Gerald Ford-Jimmy Carter Presidential Debate.  In the “debate” (shown below — the noted section is about 6 minutes in), Chevy Chase, as Gerald Ford, responded to a difficult economics question as follows.

President Gerald R. Ford: [ sweating ] It was my understanding that there would be no math… during the debates.

Continue reading

The Missing Lead

big_butt_chairI’m a big fan of Jake Tapper.  I thought he was terrific at ABC News as the senior White House correspondent and I was disappointed when he wasn’t picked to host This Week both when George Stephanopoulos left in 2010 and when he came back in 2012.  As of 2013, Jake returned to CNN to become Chief Washington Correspondent and anchor of a new weekday television news show, The Lead with Jake TapperThe Lead, which debuted this week to generally good reviews, is the first CNN show to launch since Jeff Zucker took over as president of CNN Worldwide to revitalize the franchise.

I agree with the good reviews, but there’s a “big but” coming. Continue reading