Thursday, April 26, 2012

Second Look: The Role of a Financial Advisor

Writing this blog has taught me a lot about personal finance and investing. This is one of a series of articles where I argue with my former self by disagreeing with one of my previous articles. Unlike politicians, I’m allowed to change my mind as I learn more from my readers and my own research.

In an article about a survey of investor attitudes toward their advisors, I said
“Portfolio returns should be the main concern of an investor.”
When it comes to a relationship with a financial advisor, I now think that other advice about saving, life planning, and tax planning are very important as well. In my own experience with a couple of financial advisors years ago, I never got anything useful in these other areas (and nothing useful in terms of portfolio returns either).

I still think that people place far too much importance on whether an advisor is likeable and inspires confidence. Good advice should be more important than a nice smile, but this doesn’t seem to be how people are wired.

If we go on the assumption that most advisors can manage to match market returns before fees, the main thing for investors to look for in an advisor is enough useful advice and guidance to justify the fees charged.

On the Positive Side …

Here are a few of my older articles that I still quite like:

I devised a 6/49 lottery strategy that is profitable if you can get access to information on which number combinations have not been chosen.

The market timer breakeven date helps to determine whether market timers have made or lost money.

Beware of geeks bearing formulas.

Dollar-cost averaging myths.


Silence as a negotiation tactic.

A quick way to find some nasty terms in a contract.

A useful way to think about the choice of a mortgage term.

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