Financial Advisers need not be competent because most investors are not worth it!

Published: February 13, 2019 at 10:35 am

I argue why there is no need for financial advisors to be competent because most investors are not worth it and the ones who are worth it do not need advisors! A few years ago, I was engaged in a debate with a colleague. I said, teachers should push themselves to become better and better otherwise they cannot set students standards to excel. She said: If the students do not push teachers, there will be no motivation for them to become better even if them themselves wanted to.
 
While there is truth or justification to both arguments, with age I feel she was right and this especially true of most investors. Most of them know nothing about portfolio management rely on luck when they assume things will turn our all right over the long term. They know nothing about risk management, nothing about conflict of interest (else they would know not to listen to a bank RM). All they want is piece-meal advice on best products, best stocks and best funds. There is no motivation to understand money management holistically. I could go on an on or you can just read a few posts here to know more. If there is one thing I have learned from nearly 7 years of blogging, it is most investor do not want to know or understand portfolio management. Ignorance is not a crime. Staying ignorant is.
Financial Advisers need not be competent because most investors are not worth it!
 
Given all this, there is no motivation for an advisor to push themselves beyond what they read in their certifications (which to begin with is not much). When you serve someone who cannot tell between good advice and bad, even a B-grade effort from the advisor is an overkill

What is the point here?

1: We must be responsible towards our money and keep learning. Not information, but knowledge
2: If we need to outsource money management then choose a conflict of interest free advisor who will not only help us invest and manage money, but also teach us along the way so we learn and can push them to advice better.
Here is a list of questions to ask a fee-only planner before signing up.
Unless investors push advisors by asking the right questions, there is no need for them to be competent. In every class there will only be a few bright students. That is enough. Their push is enough for any self-respecting teacher to dig deeper and teach better. Similarly, only a few clients would understand and appreciate the holistic financial planning process. They are enough to push any self-respecting advisor to learn more and serve better. All we can do is to ask, are we one such DIY investor, one such client or one such advisor?
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My new book for kids: “Chinchu gets a superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both boy and girl version covers of Chinchu gets a superpower
Most investor problems can be traced to a lack of informed decision making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain?
Amazon review of Chinchu gets a superpower
Amazon review of Chinchu gets a superpower
What is this book about? As parents, if we had to groom one ability in our children that is key not only to money management and investing but for any aspect of life, what would it be? My answer: Sound Decision Making. So in this book, we meet Chinchu who is about to turn 10. What he wants for his birthday and how his parent’s plan for it and teach him several key ideas of decision making and money management is the narrative.
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
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About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations based on money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
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