Here are some "funny" thoughts from the wonderful book The Bogleheads' Guide to Investing
I helped put two children through Harvard -- my broker's children. Michael LeBoeuf
Ha! Very cute. But also, it serves as a warning. More on that later. Here's another one -- this time it's a "cute" saying that one of the authors had at a brokerage house where he worked:
When someone buys or sells an investment, the broker makes money, the brokerage house makes money, and two out of three ain't bad.
The chapter these are quoted from (chapter 16) then goes on to talk about the alphabet soup of financial designations out there today (they even list 48 of them -- then there's always the ubiquitous "financial advisor," a term that seems to cover almost anyone) and how each of us needs to be very careful when selecting any sort of financial advisor. We need to make sure they are working in our best interest -- not in theirs.
The chapter ends with what I consider some great advice on this issue:
If you're considering hiring a financial professional, you still need to do your homework first in order to become a better-educated consumer. When it comes to your financial future, remaining an uninformed consumer simply isn't an acceptable option. And, perhaps by the time that you've finished reading this book (and a few others) and discover that investing isn't rocket science, you may just decide that you can handle the task, and that you, too, will become a do-it-yourself investor.
A few thoughts here:
1. That's what Free Money Finance is about -- helping you to become (or become better) your own financial advisor. Or at least get you to the point that you can pick a good planner and know what he/she is talking about most of the time.
2. Costs matter if you want to maximize your investment returns (or your net worth for that matter.) Financial advisors are costs. If they deliver more in value than they cost, then you're making a wise investment. If not, you're losing money.
3. I'm not anti-advisor. I'm simply saying that it's "buyer beware" when you decide to hire an advisor. And since this transaction deals with your money, be sure to really, really beware.
4. I use financial advisors myself. For instance, I use a CPA to do my taxes. Click through if you want details on my reasons why.
I've written a lot on this subject previously. For more thoughts, see these posts:
I understand part of FMF culture is to promote financial awareness and intelligence outside of the advisor circle- you do that quite well. But, I'm perplexed when you say you "aren't anti-advisor" and then crack jokes and post misleading quotes about a crucial and growing industry. A CPA is not a financial advising designation- far from it. It's a state-issued tax credential.
The first joke was funny, but ironic in that most parents and grandparents are lacking any good information about establishing 529 plans to help save for college education. Some who I've spoken with were actually setting up UGMA accounts- a dangerous move which could prevent the beneficiary from receiving grants and other need-based financial aid. Advisors = lifesavers when dealing with many older people who rarely buy personal finance books and wouldn't read them if they did.
This is an important reality.
Second joke- funny but misleading and highly inaccurate. I know more than a handful of satisfied investors. BTW- for aggressive broker bashing, check out Dan Solin's new book- certainly not the "smartest investment book I'll ever read" but a good contribution for do-it-yourself investors.
Third point- a very good one, and very Bogle-esque. That being said, it's idealistic and unrealistic. Sometimes when I try to explain financial concepts (such as the internal expenses of actively managed mutual funds) to clients, they look at me like I'm crazy. It's simply a matter of avoiding focusing on what you don't know. Some people (rich people included) just don't want to see, hear, or read about personal finance.
Posted by: Russell Bailyn | December 04, 2006 at 11:16 AM