I received an email comment on yesterday’s post that ended with
“Thanks for the insight. And please take it easy on Investment Advisors ... some of us are genuinely trying to improve the lives of our clients.”
The funny thing is that I do believe that some (probably most) financial advisors genuinely try to help their clients. So how can I believe this given my many past remarks on this subject? Let me explain starting with an analogy.
The company I work for has a few direct competitors. The work my colleagues and I do is designed to increase our market share which means taking market share away from our competitors. If we succeed in making more desirable products, then our competitors will shrink and possibly even fail. This would cause people to lose their jobs.
Few workers think in these terms, but the truth is that their efforts are aimed at destroying other people's jobs. Of course this is the nature of capitalism and it serves us well, but I don't really like to think in terms of taking away someone else’s job. As a matter of fact, if I saw a direct connection between some action on my part and a particular person losing his job, I might not be able to bring myself to do it. This is likely true of most of my colleagues as well. Yet we all work feverishly to destroy other people’s jobs anyway.
The same type of situation exists with many financial advisors. They work within a system designed to extract a large percentage of their clients’ savings each year, yet they individually genuinely want to help their clients. In my opinion the problem is the system that most advisors work within, not the financial advisors themselves.
On a personal level, I have a close friend who tried his hand at selling mutual funds for a few years. I can guarantee that he really did want to help people. He is always ready to pitch in when someone in our circle of friends needs help. But the net effect of his efforts as a financial advisor was to move people into segregated funds that charge MERs of over 3% each year. I have a hard time calling this “help” regardless of his intent.
I’ll leave it up to financial advisors to decide whether this feels like me taking it easy on them or if it feels like more of the same.