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March 12, 2009


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Beware the emotional hooks too. Sometimes people get "hooked" on their financial adviser. They feel bad about dumping them and they stay too long.

Great to know!

Your discussion of mutual fund loads is a bit unfair to "mutual fund salespeople" i.e. brokers. Their argument that the loads work out to be less than the 1% fee that you charge is reasonable. Your dismissal of it because "you are not getting any real value for a mutual fund sales charge" is not. A particular broker may, in fact, not be providing value, but the same could be said of a bad fee-only financial planner.

I also have a hard time believing that many readers of this blog are likely to consider hedge funds, but if they do they should know that you've greatly exaggerated the case against. Hedge fund managers don't take their 20% of profits "any time the fund exceeds its high-water mark" but only at year-end or when the client closes the account. Most hedge fund managers have a single flagship fund that they live or die with, unlike, it might be said, many mutual fund companies. And a three year lockup is almost unheard of, and certainly would not be typical for a newly started fund as you imply. What is your source for saying it is "average"?

A week or so ago there was a discussion here about whole life. The point made above about whole life having hooks is another point often overlooked in its drawbacks. Once you have committed to a whole life "investing strategy" there is no going back without significant loss of capital. If you stick it through all the way to the end of the strategy and are happy with it all the way it may work out well for you. But you can't change your mind after 2 years, 5 years, 10 years, 20 years without really messing it up and losing a lot of money.

Its difficult to make that kind of financial committment and be sure you don't need to change your mind.

If only I had known this a few years ago before I made a short-term investment in what my broker said was my best option (Class A Shares). 5.75% in fees and 9 month later after having lost thousands because of a horrible selection I got what was left of the money out, and have yet to use the broker since.

I'm appalled by the misinformation the brokers give and the "Oh, I'm sorry, but there's nothing I can do now"-response once you catch on to their game.

This is another great article in this series from Marotta. Very informative.

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