Most of my friends and family invest with a financial advisor. I use the term “advisor” very loosely here because all the pretty much every one of these clients got for their typical 2-1/2 percent fees are a hodgepodge of mutual funds thrown together. It is very rare to see a client with basics like a written financial plan and a well-thought out investment policy. It appears that my circle of friends and family are not uniquely unfortunate; most Canadians who work with an advisor do not have these basics in place.
Jon Chevreau recently reported from a financial planning symposium that even Certified Financial Planners (CFPs) do not routinely create financial plans for their clients. One industry insider said she often sees documents with “Your Financial Plan” cover pages with a simple asset allocation recommendation on the inside. Mr. Chevreau closed his piece with the simple suggestion that ALL clients should routinely get comprehensive financial plans.
The more I see investors indulging in self-destructive habits like panicking, chasing performance, not working from an investment policy, trading too much etc. the more I’m convinced that many investors would be better served working with a financial advisor who can bring some discipline to the investment process. Unfortunately, competent advisors seem to be few and far between. Canadians pay financial advisors billions in compensation each and every year. Is it too much to ask that we receive the service we paid our hard-earned money for?
