Financial Professionsals. Do They Serve Any Purpose? Part II

Since my recent rant about financial planners, I learned a few things.

1) A former industry professional, with more than 20 years experience writes that: "There is an unbelievable lack of understanding of options amongst all levels and all participants within financial institutions…The regulatory requirements for brokers, managers etc is antiquated and insufficient. For that reason many professionals do not understand today's options markets.

He goes on to say that too many not only don't understand options, but also are more concerned with not being sued if a client loses money, than they are in providing clients with the ability to reduce risk.

2) Preet writes an excellent financial blog from Canada.  He was primarily a financial advisor until recently, and offers this: "
I’ll try not to bite the hand that feeds me too much (I’m still in the industry), but many of the criticisms of the industry stem from the fact that advisors are paid as salespeople and not advisors, and training is focused on sales techniques not portfolio management."

3) Gail, A well-respected financial journalist writes: "The calls for help are frantic.  Please send me an investment advisor who will stop losing my money." 

The fact that such advisors are unable to provide worthwhile advice on how to avoid huge losses, is a disgrace. 

Conservative option strategies, anyone?


Gail describes how a 77-year old woman was told to invest 60% in stocks and 40% in bonds by an advisor who never bothered to get in touch with her over the past five years.  When the client finally called the advisor, the advice was to keep only 25% in stocks. 

That's it?  Go to 25% now?  He never called.  He left her stranded.  Why?   Financial advisors charge fees for this non-service?  How do they sleep at night? 

My opinion: This is just more 'business as usual' in the investment universe; earn commissions and ignore the client.

4) Ron Leiber, financial columnist for the NT Times "turned to financial planners and investment advisers who got their start as psychologists…I asked them this: At this troubling moment, what’s the best way to reorient how we think about money, before we make any rash decisions."

One advisor offered this nonsense:  "His answer to clients who articulate that nightmare is this: the markets will eventually recover."

I cannot imagine how anyone who gets paid for advice can offer that garbage to clients.  It's true that the US markets have always recovered in the past (sometimes slowly).  We're currently trading at 12-years lows and yesterday, the Japanese markets established a new 26-year low.  Does anyone truly believe that can't happen here?


Bottom line is that too many planners/advisors may have passed exams that allow them to be licensed to offer advice, but they are failing clients just the same.  No one expects them to pick individual stocks or recommend only winning mutual funds, but they lack the skills to protect their clients.  They, like almost all investors, make money during bull markets, and it's likely that their clients are unaware of how much (or how little) the planner's advice affected the bottom line.   But when the bear markets arrive, as they always do, the licenses aren't worth very much because the advisors simply do not understand how to reduce risk by hedging with options.  Who loses from that: the planner or the client?  Someone must protect those clients.  I'm trying.


2 Responses to Financial Professionsals. Do They Serve Any Purpose? Part II

  1. CHAKRA 03/10/2009 at 9:14 AM #

    Hi Mark
    Please give me the exact Blog address for “Preet writes an excellent financial blog from Canada. ” as you mention in your Blog.
    I cannot get access from your Blog when I click it.

  2. Mark Wolfinger 03/10/2009 at 9:44 AM #

    Link corrected.