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Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 9:44 am
by tennisplyr
While many Americans say they need financial guidance, most don't trust financial advisers a recent Wells Fargo survey shows.

https://www.usatoday.com/story/money/pe ... 103598166/

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 9:54 am
by willthrill81
The problem is that the majority of financial advisers today are salespeople. I have nothing against those who work in sales; I worked in that area for years myself. But the issue here is that their compensation rarely aligns with investors' best interests. Until that happens, Americans are right to think twice about what their advisers tells them. I certainly wouldn't trust 90% of the folks out there that use that moniker.

A friend of mine is a financial adviser and charges people a 1.4% AUM fee, which I find absurdly high. He has an obvious interest in getting clients to move as much of their assets under his management as he possibly can, even though they may be invested perfectly fine just where they are. And is he giving them 1.4% worth of investment advice? The historical data scream no. In fact, he says that he's more of a financial planner and doesn't really do much in the way of investment advice. I recently asked him whether he would ever move to a fee-only (i.e. fee per hour) basis, and he said no because he likes the steady, residual income he gets from his current compensation model.

This is why I'm not convinced at all that the whole "fiduciary" thing will solve the problem. If advisers are using a fee-based (i.e. AUM) approach, they still have a strong interest to move assets from wherever they are to their control.

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 10:08 am
by nedsaid
Can you blame them? How many people get talked into such things as Variable Annuities within already tax sheltered IRA accounts? I see this a lot on the forum and know people who have been talked into these. The Assets Under Management (AUM) fees charged to investors is often in excess of one percent a year. In my opinion, one percent a year should be a ceiling and not a floor. Not a good deal when the advisor keeps much of your investment return.

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 10:24 am
by MJW
They may not trust them, but many folks will either use one anyway or simply choose to remain ignorant about their finances.

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 10:41 am
by VictoriaF
As Bill Bernstein has said, if you know enough to choose an appropriate financial adviser you don't need one.

From reading the Forum for over 15 years, I have noticed that the most egregious posters' financial problems resulted from their financial advisers putting them into inappropriate funds, charging high fees of various types, and locking them in investments that are too expensive to escape.

Victoria

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 11:23 am
by BW1985
Sadly too many of them still do though.

There's a reason the big boys they work for don't want any regulation/reform, it might stop the gravy train..

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 12:26 pm
by Grt2bOutdoors
I don't blame them. Why would you trust someone who does one or more of the following?:

- develops a portfolio for you comprised of 15 or more actively managed high expense ratio or front-end loaded mutual funds in a taxable account leaving you to figure out the tax implications each year
- does not invest or allocate investments based on risk/tolerance instead recommends purchases from the firms recommended list
- recommends purchase of a variable annuity that has a ten year deferred sales charge
- sells you whole life insurance
- thinks buying individual securities such as stock and/or bonds is a good idea for income
- thinks buying Master Limited Partnerships is a good idea
- does not listen to the needs of client
- steals from your account, as in outright theft of funds
- doesn't know the difference between average maturity and duration
- reads Barron's and uses data from it and CNBC to coldcall clients
- listens to and quotes actively from James Cramer (actually know a feller who does this :oops: and no, I don't use an adviser).
- can not define what standard deviation means in context of portfolio returns
- never met a stock they did not like

Now, if you want to play with them, toss out some jargon like standard deviation, r2, covariance, duration, average maturity, have them explain the difference between a BBB+ and a BB- and which types of funds would typically hold them. :) Ask them for an example of developing a total return portfolio (get ready for the 20 fund "diversified" model) then drop it on them that you follow the Taylor 3 Fund model - get ready for the look of befuddlement. :twisted:

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 12:33 pm
by VictoriaF
Grt2bOutdoors wrote:I don't blame them. Why would you trust someone who does one or more of the following?:

- develops a portfolio for you comprised of 15 or more actively managed high expense ratio or front-end loaded mutual funds in a taxable account leaving you to figure out the tax implications each year
- does not invest or allocate investments based on risk/tolerance instead recommends purchases from the firms recommended list
- recommends purchase of a variable annuity that has a ten year deferred sales charge
- sells you whole life insurance
- thinks buying individual securities such as stock and/or bonds is a good idea for income
- thinks buying Master Limited Partnerships is a good idea
- does not listen to the needs of client
- steals from your account, as in outright theft of funds
- doesn't know the difference between average maturity and duration
- reads Barron's and uses data from it and CNBC to coldcall clients
- listens to and quotes actively from James Cramer (actually know a feller who does this :oops: and no, I don't use an adviser).
- can not define what standard deviation means in context of portfolio returns
- never met a stock they did not like
...
Excellent list. I will add that advisers also mislead their clients by omission in order to protect the amount of Assets Under Management (AUM), from which they collect a percentage. Specifically:
  • - They don't advise to delay taking Social Security thus denying their clients a secure inflation-adjusted income stream.
    - For many people, Roth conversions are a financially prudent choice, but advisers seldom recommend them.
    - In today's low-interest rate environment, bank CDs have better interest earnings and less risk than many low-risk marketable securities, but advising to get CDs would reduce the AUM.
Victoria

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 6:20 pm
by Dead Man Walking
Most investors struggle with determining their risk tolerance. The questionnaires on websites such as Vanguard help, but I've never known an investor who understood his real risk tolerance until he experienced a real bear market. Most people don't understand that a 50% loss requires a 100% gain to get back to even. I've heard young people who became discouraged after the last downturn when they looked at the statements from their Target Retirement Funds. A 90% allocation to equities can test the will of any investor during a significant downturn. Advising them to stay the course is difficult when they believe that they're aboard a sinking ship. An advisor who could help determine the client's risk tolerance and alleviate the anxiety that is bound to occur during a bear market is probably worth a 1% aum fee.

Many people simply do not understand the concept of rebalancing. Of course, this problem can be resolved by investing in Life Strategy Funds or Target Retirement Funds. Another solution may be using a robo advisor and investing in the 3 fund portfolio.

I recently considered hiring an advisor because of my age and health. Dealing with one's mortality can be an enlightening experience. Since I had an experience with an advisor of a 403b plan that actually stole funds from his clients, I am leery of financial advisors in general. I resolved my problem by writing instructions to my heirs. My instructions were to exchange all my funds for an appropriate Life Strategy Fund. Since my main concern was rebalancing, this resolved my problem.

DMW

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 6:34 pm
by TD2626
I disagree with the article's insinuation that people should seek advisers. Investing isn't like any other subject - it's vitally important. Done right, investment returns have the potential to make you more money than your regular job over the course of a lifetime. I think that people should read many, many articles and books on investing, read the Boglehead's Guide to investing, and spend a few thousand hours reading up on the Boglehead's Wiki and Forum to gain a deep, theory-based understanding of all major investment options and how they work and perform. Yes, this likely takes years of work. However, since investing could earn an amount of money comparable to regular employment, it should be taken on as a part time job.

Also, for people that, for whatever reason, don't want to get involved in investment theory, three-fund portfolios could probably be explained and discussed fully in about 10 hours, so it is still likely possible for someone to not need routine financial advising services.

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 6:35 pm
by miamivice
A couple years back, I had a session with a Vanguard financial advisor to setup a plan for me. He recommended that I sell all individual stocks and invest instead with Vanguard mutual funds.

Made me wonder. Was this truly a better financial plan, or was he trying to move assets from ones that don't profit Vanguard (individual stocks) to ones that are profitable for Vanguard (Vanguard mutual funds)? He time was being paid by Vanguard (not me) so I decided I couldn't trust his advice.

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 6:40 pm
by TD2626
miamivice wrote:A couple years back, I had a session with a Vanguard financial advisor to setup a plan for me. He recommended that I sell all individual stocks and invest instead with Vanguard mutual funds.

Made me wonder. Was this truly a better financial plan, or was he trying to move assets from ones that don't profit Vanguard (individual stocks) to ones that are profitable for Vanguard (Vanguard mutual funds)? He time was being paid by Vanguard (not me) so I decided I couldn't trust his advice.
It is worth noting that Vanguard does offer brokerage services and charges commissions for individual stock trades. Also, the folks who wrote the Wiki and who are well respected senior forum members are impartial.

The fact that so many recommend the Three Fund portfolio suggests that it is very reasonable.

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 7:04 pm
by selftalk
Why should they? Our government cannot get a fiduciary bill passed. What does that tell you ?

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 7:10 pm
by tennisplyr
Dead Man Walking wrote:Most investors struggle with determining their risk tolerance. The questionnaires on websites such as Vanguard help, but I've never known an investor who understood his real risk tolerance until he experienced a real bear market. Most people don't understand that a 50% loss requires a 100% gain to get back to even. I've heard young people who became discouraged after the last downturn when they looked at the statements from their Target Retirement Funds. A 90% allocation to equities can test the will of any investor during a significant downturn. Advising them to stay the course is difficult when they believe that they're aboard a sinking ship. An advisor who could help determine the client's risk tolerance and alleviate the anxiety that is bound to occur during a bear market is probably worth a 1% aum fee.

Many people simply do not understand the concept of rebalancing. Of course, this problem can be resolved by investing in Life Strategy Funds or Target Retirement Funds. Another solution may be using a robo advisor and investing in the 3 fund portfolio.

I recently considered hiring an advisor because of my age and health. Dealing with one's mortality can be an enlightening experience. Since I had an experience with an advisor of a 403b plan that actually stole funds from his clients, I am leery of financial advisors in general. I resolved my problem by writing instructions to my heirs. My instructions were to exchange all my funds for an appropriate Life Strategy Fund. Since my main concern was rebalancing, this resolved my problem.

DMW
Great idea!

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 7:14 pm
by Pajamas
What's shocking is that 35% of Americans trust financial advisors. That's significantly higher than the percentage that trust car salesmen, members of Congress, or lawyers.

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 7:16 pm
by tennisplyr
TD2626 wrote:I disagree with the article's insinuation that people should seek advisers. Investing isn't like any other subject - it's vitally important. Done right, investment returns have the potential to make you more money than your regular job over the course of a lifetime. I think that people should read many, many articles and books on investing, read the Boglehead's Guide to investing, and spend a few thousand hours reading up on the Boglehead's Wiki and Forum to gain a deep, theory-based understanding of all major investment options and how they work and perform. Yes, this likely takes years of work. However, since investing could earn an amount of money comparable to regular employment, it should be taken on as a part time job.

Also, for people that, for whatever reason, don't want to get involved in investment theory, three-fund portfolios could probably be explained and discussed fully in about 10 hours, so it is still likely possible for someone to not need routine financial advising services.

Unfortunately, we all know that there's a list a mile long that investors have for not taking it on. I'm afraid much like any other service provider, many would rather have someone else do it.

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 7:22 pm
by TD2626
With hundreds of thousands of dollars (or even millions) at stake, I think this is one area where people need to be at least reasonably informed. OK, maybe high interest is too much to expect -- but financial literacy is very important and people should at least give it a try.

I am glad that the Wiki is available to give background information to interested readers, and am very grateful to those who have constructed it.

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 7:37 pm
by miamivice
TD2626 wrote:
miamivice wrote:A couple years back, I had a session with a Vanguard financial advisor to setup a plan for me. He recommended that I sell all individual stocks and invest instead with Vanguard mutual funds.

Made me wonder. Was this truly a better financial plan, or was he trying to move assets from ones that don't profit Vanguard (individual stocks) to ones that are profitable for Vanguard (Vanguard mutual funds)? He time was being paid by Vanguard (not me) so I decided I couldn't trust his advice.
It is worth noting that Vanguard does offer brokerage services and charges commissions for individual stock trades. Also, the folks who wrote the Wiki and who are well respected senior forum members are impartial.

The fact that so many recommend the Three Fund portfolio suggests that it is very reasonable.
My comment is not intended to debate whether the Boglehead three fund portfolio is the best way to invest. Rather, it's a comment that an advisor who is hired by a mutual fund company is not offering impartial advice, even if he/she is hired by Vanguard. The financial relationship between the advisor and Vanguard will forever make the advisor's advice suspect, even if it happens to be good advice.

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 8:13 pm
by Dale_G
miamivice wrote:A couple years back, I had a session with a Vanguard financial advisor to setup a plan for me. He recommended that I sell all individual stocks and invest instead with Vanguard mutual funds.

Made me wonder. Was this truly a better financial plan, or was he trying to move assets from ones that don't profit Vanguard (individual stocks) to ones that are profitable for Vanguard (Vanguard mutual funds)? He time was being paid by Vanguard (not me) so I decided I couldn't trust his advice.
Too bad. It was probably excellent advice - and no commissions involved.

Dale

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 8:34 pm
by arcticpineapplecorp.
few things I found interesting from the article:
1.
In fact, my colleague Selena Maranjian reported last year that between 2005 and 2015, an estimated 87,000 financial advisers were found guilty of some form of misconduct. These transgressions ranged from unsuitable advice, to unauthorized activity, and to outright fraud.

On the other hand, the aforementioned 87,000 advisers represent just 7% of the total sample set studied, which means most financial professionals didn't engage in misconduct.
I kinda thought 7% is high but I don't know what to compare it with. Are the number of lawyers, doctors or other professionals who engage in misconduct higher/lower/the same? Anyone know?

2.
If you've been thinking of using a financial adviser but aren't sure who to trust, one of the best things you can do is get a recommendation from a long-term, satisfied client. You should also feel free to ask your adviser how he or she makes money, so that you get a full understanding of the various fees you might face.
Um...no. no. no.

conversation circa 1990s...
You: "Say Bob, you've been with your advisor for awhile now, right?"
Bob: "Sure have."
You: "You satisfied with him?"
Bob: "Sure. He's done great for us. Beaten the market every single year for more years than I can count."
You: "Well, boy am I glad I talked to you. I was looking for a recommendation from a long-term, satisfied client like you. Say, what's your guy's name?"
Bob: "Bernie Madoff"

You don't talk to your friend. You do ask what the advisor charges. But you do more. You look at his/her form adv to see how s/he's compensated, how long s/he's operated, if there are any infractions, etc. (https://www.sec.gov/fast-answers/answersformadvhtm.html). You do your due diligence, which is more than asking your friend. I could have easily substituted the name Ed Jones above. No, Ed Jones isn't committing fraud like Bernie, but how many people are using Ed Jones because their friend does? Or because they have a local office? And how many people have been put into variable annuities or indexed annuities by Ed Jones or sold whole life instead of more suitable term, or been sold loaded funds instead of no-load funds? Far too many.

3. The OP said Wells Fargo did the study. I don't see that Wells Fargo did the survey. They didn't. AAII did the survey:
In a 2016 poll by the American Association of Individual Investors (AAII), 65% of respondents said that they mistrust the financial services industry to some degree.
The bit about Wells Fargo was:
In a 2016 Wells Fargo study, 58% of savers with 401(k) plans said they'd like more help choosing investments.
I had to re-read it because I thought it would have been ironic that a survey that states "most American's don't trust financial advisers" was done by none other than...Wells Fargo...the company that fraudulently opened 2,000,000 fake accounts of their own customers which resulted in them settling fines of $110,000,000. :oops:

https://www.google.com/search?q=how+man ... 8&oe=utf-8

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 8:35 pm
by miamivice
Dale_G wrote:
miamivice wrote:A couple years back, I had a session with a Vanguard financial advisor to setup a plan for me. He recommended that I sell all individual stocks and invest instead with Vanguard mutual funds.

Made me wonder. Was this truly a better financial plan, or was he trying to move assets from ones that don't profit Vanguard (individual stocks) to ones that are profitable for Vanguard (Vanguard mutual funds)? He time was being paid by Vanguard (not me) so I decided I couldn't trust his advice.
Too bad. It was probably excellent advice - and no commissions involved.

Dale
It may have been excellent advice, but I couldn't trust it as I knew that making the move that he suggested would also financially benefit his employer. He was the wrong person to seek advice from. This is why most Bogleheads recommend going with financial advisors that you pay directly rather than ones that are hired by the companies that they represent.

For clarity, over 92% of our portfolio is already held in Vanguard index mutual funds.

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 9:13 pm
by nisiprius
"Whenever I read a story in the paper about someone losing their entire retirement savings, it's never someone who managed their own investments, it's always someone who had an advisor."--A friend of mine.

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 9:15 pm
by friar1610
20+ years ago when I was getting ready to retire from the Navy I answered an ad for "financial planners" from a well known financial management firm. They had a retired Navy guy who was working for the company call me and we talked for a while. I think he might have leveled with me more than he might have otherwise because of the Navy connection. He was pretty clear that the job wasn't about really about financial planning - it was about selling (load) mutual funds. He was also very interested in knowing how big my network of Naval officer friends was and whether or not I had any problem using it. As the conversation was winding down and it was apparent this was not the job for me he put on his salesman hat and tried to sell me a fund!

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 9:24 pm
by GerryL
VictoriaF wrote:As Bill Bernstein has said, if you know enough to choose an appropriate financial adviser you don't need one.

From reading the Forum for over 15 years, I have noticed that the most egregious posters' financial problems resulted from their financial advisers putting them into inappropriate funds, charging high fees of various types, and locking them in investments that are too expensive to escape.

Victoria

Yes and yes.
And the suggestion in the article about asking for a recommendation from a friend who is satisfied with their FA? No.
I cringe when my friends tell me how happy they are with their financial advisor, adding "And they don't charge me anything!"

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 9:58 pm
by David Jay
Grt2bOutdoors wrote:I don't blame them. Why would you trust someone who does one or more of the following?:

- develops a portfolio for you comprised of 15 or more actively managed high expense ratio or front-end loaded mutual funds in a taxable account leaving you to figure out the tax implications each year
- does not invest or allocate investments based on risk/tolerance instead recommends purchases from the firms recommended list
- recommends purchase of a variable annuity that has a ten year deferred sales charge
- sells you whole life insurance
- thinks buying individual securities such as stock and/or bonds is a good idea for income
- thinks buying Master Limited Partnerships is a good idea
- does not listen to the needs of client
- steals from your account, as in outright theft of funds
- doesn't know the difference between average maturity and duration
- reads Barron's and uses data from it and CNBC to coldcall clients
- listens to and quotes actively from James Cramer (actually know a feller who does this :oops: and no, I don't use an adviser).
- can not define what standard deviation means in context of portfolio returns
- never met a stock they did not like

Now, if you want to play with them, toss out some jargon like standard deviation, r2, covariance, duration, average maturity, have them explain the difference between a BBB+ and a BB- and which types of funds would typically hold them. :) Ask them for an example of developing a total return portfolio (get ready for the 20 fund "diversified" model) then drop it on them that you follow the Taylor 3 Fund model - get ready for the look of befuddlement. :twisted:
+ untraded REITS

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 11:29 pm
by whodidntante
I'm not willing to turn over control of my portfolio to anyone, so long as I have my wits. I'm open to new ideas and to challenges of my ideas, but I will be the one pushing the buttons and living with the outcome.

Re: Most Americans don't trust financial advisers

Posted: Wed Jul 19, 2017 11:30 pm
by Dead Man Walking
I have discussed investing with many people who are in their 30's and 40's. Most of them are illiterate when it comes to investing. Their experience is limited to a presentation by the investment firm managing their company's 401k plan. Their anecdotes about these presentations are ludicrous. They are usually guided to an aggressive allocation. Unlike many who post here, I believe that Target Retirement Funds that have a 90% allocation to equities expose investors to too much risk. I may be an out of touch conservative investor that won't live long enough to see if these aggressive portfolios work out.

Bogleheads don't realize that the vast majority of the population have little or no interest in investing. They are not going to read books on investing. I always advise them to read this forum since I believe that this forum is akin to the Cliff's Notes on investing. Many never visit the website. Consequently, they fall prey to the predatory salesmen who manage their company's 401k plan.

DMW

Re: Most Americans don't trust financial advisers

Posted: Thu Jul 20, 2017 12:09 am
by WoodSpinner
Dead Man Walking wrote:I have discussed investing with many people who are in their 30's and 40's. Most of them are illiterate when it comes to investing. Their experience is limited to a presentation by the investment firm managing their company's 401k plan. Their anecdotes about these presentations are ludicrous. They are usually guided to an aggressive allocation. Unlike many who post here, I believe that Target Retirement Funds that have a 90% allocation to equities expose investors to too much risk. I may be an out of touch conservative investor that won't live long enough to see if these aggressive portfolios work out.

Bogleheads don't realize that the vast majority of the population have little or no interest in investing. They are not going to read books on investing. I always advise them to read this forum since I believe that this forum is akin to the Cliff's Notes on investing. Many never visit the website. Consequently, they fall prey to the predatory salesmen who manage their company's 401k plan.

DMW
+1

I certainly have had to learn a lot in a short time and didn't realize just how much there is to take in. This is a pretty intimidating group intellectually but I really am hooked on the learning and discussions. Plus everyone seems to put up with my stupid questions :oops: .

That said, My FA and I just parted on very amicable terms. I found his insights and advice very helpful and it was a good opportunity to learn and understand some important investing lessons. I respect his advice and never felt he was acting in his own interest. But things have changed quite a bit and I am much more prepared to do things on my own. It took me awhile to reach this point and I realize quite clearly that not everyone wants to invest the time and take responsibility for the decisions and the risks involved.

Just wanted to put in a plug for the good, fiscally responsible, fiducially aware FAs out there. I suspect there are a great many of them, struggling to help their clients and taking a great deal of pride in the assistance they provide. They play a really valuable role in an industry that is rapidly changing--I hope the good survive and the bottom-feeders are separated out like the chaff from wheat.

Just my perspective 8-)

Re: Most Americans don't trust financial advisers

Posted: Thu Jul 20, 2017 8:10 am
by BlackStrat
More telling is that most Americans don't have enough investable assets to actually be able to HIRE a financial adviser

:shock:

Re: Most Americans don't trust financial advisers

Posted: Thu Jul 20, 2017 8:28 am
by goingup
TD2626 wrote:I disagree with the article's insinuation that people should seek advisers. Investing isn't like any other subject - it's vitally important. Done right, investment returns have the potential to make you more money than your regular job over the course of a lifetime. I think that people should read many, many articles and books on investing, read the Boglehead's Guide to investing, and spend a few thousand hours reading up on the Boglehead's Wiki and Forum to gain a deep, theory-based understanding of all major investment options and how they work and perform. Yes, this likely takes years of work. However, since investing could earn an amount of money comparable to regular employment, it should be taken on as a part time job.

Also, for people that, for whatever reason, don't want to get involved in investment theory, three-fund portfolios could probably be explained and discussed fully in about 10 hours, so it is still likely possible for someone to not need routine financial advising services.
This is the kind of talk that could send any newbie running into the arms of an advisor!

I disagree entirely. If you are a person who can save 15% of your income and plop it into a 401K's Target Fund for 35 years you will be just fine. Read a couple books if you like but it's really about disciplined saving, and low-cost middle of the road investing. If you want to retire earlier, save more.

Jack Bogle thinks investing is simple, just not easy. The "not easy" part involves the discipline to save, choose right and sit tight. It's not about being a financial scholar. If this is what you have surmised from this forum, we as the BH community have failed.

The Bogleheads® Philosophy
Develop a workable plan
Invest early and often
Never bear too much or too little risk
Never try to time the market
Use index funds when possible
Keep costs low
Diversify
Minimize taxes
Keep it simple
Stay the course

Re: Most Americans don't trust financial advisers

Posted: Thu Jul 20, 2017 8:46 am
by Grt2bOutdoors
Dead Man Walking wrote:I have discussed investing with many people who are in their 30's and 40's. Most of them are illiterate when it comes to investing. Their experience is limited to a presentation by the investment firm managing their company's 401k plan. Their anecdotes about these presentations are ludicrous. They are usually guided to an aggressive allocation. Unlike many who post here, I believe that Target Retirement Funds that have a 90% allocation to equities expose investors to too much risk. I may be an out of touch conservative investor that won't live long enough to see if these aggressive portfolios work out.

Bogleheads don't realize that the vast majority of the population have little or no interest in investing. They are not going to read books on investing. I always advise them to read this forum since I believe that this forum is akin to the Cliff's Notes on investing. Many never visit the website. Consequently, they fall prey to the predatory salesmen who manage their company's 401k plan.

DMW
+1. And if they are not allocated 90/10 then they are investing the bulk of their money in bonds, because bonds you can't lose money with bonds! :oops: People will spend more time deciding what tv show they are going to watch, where to vacation and waiting on line to purchase coffee than they do reading a book.

Re: Most Americans don't trust financial advisers

Posted: Thu Jul 20, 2017 9:49 am
by flamesabers
MJW wrote:They may not trust them, but many folks will either use one anyway or simply choose to remain ignorant about their finances.
I think your statement is very true unfortunately. While nobody wants to get ripped off by their FA, it seems the path of least resistance is to let a FA manage their money. Too often when the topic of investments come up, the people I talk with either feel intimidated by DIY investing or they just have no interest with managing their own portfolio.
Pajamas wrote:What's shocking is that 35% of Americans trust financial advisors. That's significantly higher than the percentage that trust car salesmen, members of Congress, or lawyers.
Perhaps if financial advisers were instead called financial salesmen, their trust rating would be much lower? :P

Re: Most Americans don't trust financial advisers

Posted: Thu Jul 20, 2017 3:57 pm
by tennisplyr
GerryL wrote:
VictoriaF wrote:As Bill Bernstein has said, if you know enough to choose an appropriate financial adviser you don't need one.

From reading the Forum for over 15 years, I have noticed that the most egregious posters' financial problems resulted from their financial advisers putting them into inappropriate funds, charging high fees of various types, and locking them in investments that are too expensive to escape.

Victoria

Yes and yes.
And the suggestion in the article about asking for a recommendation from a friend who is satisfied with their FA? No.
I cringe when my friends tell me how happy they are with their financial advisor, adding "And they don't charge me anything!"
Yes and I am constantly amazed how some seemingly bright and successful people waste big money on these guys.

Re: Most Americans don't trust financial advisers

Posted: Thu Jul 20, 2017 6:41 pm
by David Jay
TD2626 wrote:Also, for people that, for whatever reason, don't want to get involved in investment theory, three-fund portfolios could probably be explained and discussed fully in about 10 hours, so it is still likely possible for someone to not need routine financial advising services.
If you don't have 10 hours, I like the "neurosphere" signature line: "If you don't know if a TargetRetirement fund is right for you, it is."

Re: Most Americans don't trust financial advisers

Posted: Thu Jul 20, 2017 7:03 pm
by Jack FFR1846
10 hours? The basics can be explained in 30 minutes. It's how long it took me to explain it to my 16 year old. This started with "a share of stock is a piece of a company".

Re: Most Americans don't trust financial advisers

Posted: Thu Jul 20, 2017 7:15 pm
by TD2626
David Jay wrote:
TD2626 wrote:Also, for people that, for whatever reason, don't want to get involved in investment theory, three-fund portfolios could probably be explained and discussed fully in about 10 hours, so it is still likely possible for someone to not need routine financial advising services.
If you don't have 10 hours, I like the "neurosphere" signature line: "If you don't know if a TargetRetirement fund is right for you, it is."
[Joke] One idea is that the number of funds, N, that are right may be able to be modeled by the following equation: N = (3*ln(x))+1, where X is the number of hours you have spent reading up on investment theory. [/Joke]

Re: Most Americans don't trust financial advisers

Posted: Thu Jul 20, 2017 7:45 pm
by Kennyt7
well with 40% of funds now indexed, investors are obviously learning the game
Eventually we will hit 100% when its taught in school as the state of Washington has recently mandated

Re: Most Americans don't trust financial advisers

Posted: Thu Jul 20, 2017 7:50 pm
by Crimsontide
tennisplyr wrote:
GerryL wrote:
VictoriaF wrote:As Bill Bernstein has said, if you know enough to choose an appropriate financial adviser you don't need one.

From reading the Forum for over 15 years, I have noticed that the most egregious posters' financial problems resulted from their financial advisers putting them into inappropriate funds, charging high fees of various types, and locking them in investments that are too expensive to escape.

Victoria

Yes and yes.
And the suggestion in the article about asking for a recommendation from a friend who is satisfied with their FA? No.
I cringe when my friends tell me how happy they are with their financial advisor, adding "And they don't charge me anything!"
Yes and I am constantly amazed how some seemingly bright and successful people waste big money on these guys.
+1 for some reason so many of these people think "their guy" has a crystal ball that never lies, until it does, then those great expectations become lifelong resentments...

Re: Most Americans don't trust financial advisers

Posted: Thu Jul 20, 2017 10:08 pm
by David Jay
Kennyt7 wrote:well with 40% of funds now indexed, investors are obviously learning the game
Eventually we will hit 100% when its taught in school as the state of Washington has recently mandated
Nope, because I will be exploiting the lack of price discovery well before 100%

That is why the "what if everybody indexed" question is moot.

Re: Most Americans don't trust financial advisers

Posted: Fri Jul 21, 2017 9:39 am
by VictoriaF
Crimsontide wrote:
tennisplyr wrote:
GerryL wrote:
VictoriaF wrote:As Bill Bernstein has said, if you know enough to choose an appropriate financial adviser you don't need one.

From reading the Forum for over 15 years, I have noticed that the most egregious posters' financial problems resulted from their financial advisers putting them into inappropriate funds, charging high fees of various types, and locking them in investments that are too expensive to escape.

Victoria

Yes and yes.
And the suggestion in the article about asking for a recommendation from a friend who is satisfied with their FA? No.
I cringe when my friends tell me how happy they are with their financial advisor, adding "And they don't charge me anything!"
Yes and I am constantly amazed how some seemingly bright and successful people waste big money on these guys.
+1 for some reason so many of these people think "their guy" has a crystal ball that never lies, until it does, then those great expectations become lifelong resentments...
Their other guy is a plumber, and both smell bad.

Victoria

Re: Most Americans don't trust financial advisers

Posted: Fri Jul 21, 2017 11:02 am
by willthrill81
Kennyt7 wrote:well with 40% of funds now indexed, investors are obviously learning the game
Eventually we will hit 100% when its taught in school as the state of Washington has recently mandated
Taught in schools? That's news to me, especially since personal finance isn't taught in any high schools TMK.

Re: Most Americans don't trust financial advisers

Posted: Fri Jul 21, 2017 11:07 am
by flamesabers
willthrill81 wrote:Taught in schools? That's news to me, especially since personal finance isn't taught in any high schools TMK.
If you haven't already, I recommend checking out this thread:

viewtopic.php?t=223842

At my high school I took personal finance, however, it was an elective and not a required course.

Re: Most Americans don't trust financial advisers

Posted: Fri Jul 21, 2017 11:13 am
by Dandy
Tough to trash the whole lot but how do you trust firms when they fight the regulation that Advisors should recommend the best option not a suitable one. Tough to be an honest trustworthy advisor when often doing the right thing makes you and the firm less money and will likely result in you being shown the door.

Re: Most Americans don't trust financial advisers

Posted: Fri Jul 21, 2017 12:33 pm
by amateurnovice
Most regular people don't know where to start with investing and they're too ashamed or afraid to ask. Asking an FA at Edward Jones is probably safer than asking an IA with his own firm or an insurance agent but even then it's a risk. So many pure scam artists are out there not even licensed or registered just taking money from people and posing as brokers or advisers that living paycheck to paycheck with only a checking account is a better bet for them. Then you get big names that hit the news like Madoff or Allen Stanford or hedge funds run by Ackman or Dalio shorting this and betting on that, it's just too much to take in and regular people don't know where to start.

Re: Most Americans don't trust financial advisers

Posted: Fri Jul 21, 2017 3:21 pm
by willthrill81
flamesabers wrote:
willthrill81 wrote:Taught in schools? That's news to me, especially since personal finance isn't taught in any high schools TMK.
If you haven't already, I recommend checking out this thread:

viewtopic.php?t=223842

At my high school I took personal finance, however, it was an elective and not a required course.
Thanks! It's news to me, although if it's been taught for years, it seems that either it is 'taking' with most of the students or the content must be really watered down given the financial behavior of most Americans.

Re: Most Americans don't trust financial advisers

Posted: Fri Jul 21, 2017 4:48 pm
by trueblueky
arcticpineapplecorp. wrote:few things I found interesting from the article:
1.
In fact, my colleague Selena Maranjian reported last year that between 2005 and 2015, an estimated 87,000 financial advisers were found guilty of some form of misconduct. These transgressions ranged from unsuitable advice, to unauthorized activity, and to outright fraud.

On the other hand, the aforementioned 87,000 advisers represent just 7% of the total sample set studied, which means most financial professionals didn't engage in misconduct.
I kinda thought 7% is high but I don't know what to compare it with. Are the number of lawyers, doctors or other professionals who engage in misconduct higher/lower/the same? Anyone know?
That 7% were found guilty does NOT mean 93% were innocent.

Unsuitable advice is rampant. Every year when I prepare taxes at a VITA/TCE site, I see evidence of churning; overly complex, duplicative funds; seniors in the 10% bracket with tax-exempt bond funds; and more, all courtesy of your friendly neighborhood salesperson.

Re: Most Americans don't trust financial advisers

Posted: Fri Jul 21, 2017 4:58 pm
by montanagirl
willthrill81 wrote:
flamesabers wrote:
willthrill81 wrote:Taught in schools? That's news to me, especially since personal finance isn't taught in any high schools TMK.
If you haven't already, I recommend checking out this thread:

viewtopic.php?t=223842

At my high school I took personal finance, however, it was an elective and not a required course.
Thanks! It's news to me, although if it's been taught for years, it seems that either it is 'taking' with most of the students or the content must be really watered down given the financial behavior of most Americans.
You mean NOT taking? I'd say do. A step had it senior year and proceeded to go into debt and default just as soon as he started to earn money.

You can't fix stupid.

Re: Most Americans don't trust financial advisers

Posted: Sat Jul 22, 2017 1:57 pm
by arcticpineapplecorp.
montanagirl wrote:
willthrill81 wrote:
flamesabers wrote:
willthrill81 wrote:Taught in schools? That's news to me, especially since personal finance isn't taught in any high schools TMK.
If you haven't already, I recommend checking out this thread:

viewtopic.php?t=223842

At my high school I took personal finance, however, it was an elective and not a required course.
Thanks! It's news to me, although if it's been taught for years, it seems that either it is 'taking' with most of the students or the content must be really watered down given the financial behavior of most Americans.
You mean NOT taking? I'd say do. A step had it senior year and proceeded to go into debt and default just as soon as he started to earn money.

You can't fix stupid.
We were only taught "The Stock Game" in high school. That taught us how to gamble. We really didn't "learn" anything. We just picked one stock and followed how it did over the course of a semester. It was basically to teach us how to read the stock pages of a newspaper (i.e., gain vs. loss from the day before, etc.). This was back in the day when the price moves were in eighths (before decimilization). I found that confusing since regular money wasn't transacted in 1/8ths. Does anyone know why they used eighths back in the day instead of some other number?

Re: Most Americans don't trust financial advisers

Posted: Sat Jul 22, 2017 5:09 pm
by tennisplyr
arcticpineapplecorp. wrote:
montanagirl wrote:
willthrill81 wrote:
flamesabers wrote:
willthrill81 wrote:Taught in schools? That's news to me, especially since personal finance isn't taught in any high schools TMK.
If you haven't already, I recommend checking out this thread:

viewtopic.php?t=223842

At my high school I took personal finance, however, it was an elective and not a required course.
Thanks! It's news to me, although if it's been taught for years, it seems that either it is 'taking' with most of the students or the content must be really watered down given the financial behavior of most Americans.
You mean NOT taking? I'd say do. A step had it senior year and proceeded to go into debt and default just as soon as he started to earn money.

You can't fix stupid.
We were only taught "The Stock Game" in high school. That taught us how to gamble. We really didn't "learn" anything. We just picked one stock and followed how it did over the course of a semester. It was basically to teach us how to read the stock pages of a newspaper (i.e., gain vs. loss from the day before, etc.). This was back in the day when the price moves were in eighths (before decimilization). I found that confusing since regular money wasn't transacted in 1/8ths. Does anyone know why they used eighths back in the day instead of some other number?
1/7 ths were too big and 1/9 ths were too small. Kinda like the days of gas pricing, .20 9/10c vs today 2.49 9/10c

Re: Most Americans don't trust financial advisers

Posted: Sat Jul 22, 2017 5:15 pm
by randomizer
tennisplyr wrote:While many Americans say they need financial guidance, most don't trust financial advisers a recent Wells Fargo survey shows.
Wise indeed!