There is an old saying “all boats rise at high tide”. It seems with the markets at all-time highs, recently rich younger generations believe it is their skill that has created their investment success. These newly wealthy investors are eschewing the guidance of an expert, according to a recent Wall Street Journal article.
However, it is not just some youthful investors who implicitly bash advisors. Famous pundits with large followers have been critical of advisors for years. However, a closer look at some of these media mavens illustrates how often they are wrong and more importantly points out what they are selling along the way. Bashing advisors apparently is a marketing tactic for them.
Suze Orman, a best-selling author, former stockbroker and former media personality on CNBC has been highly critical of financial advisors. Barrons wrote about her interview in ThinkAdvisor where Ms. Orman made a number of pejorative comments that lack any kind of reference to research or facts.
Orman claims that advisors themselves are bad with money, yet provides no facts to support this claim. “Most advisors have a horrific relationship with money”. Why would she make this assertion? Could it be that her particular conflict of interest is that she sells her brand of consumer financial advice such as videos, books and pre-paid debit cards, and that these at some level could be considered an alternative to help from a licensed professional?
Orman also claims that most investors don’t need advisors, as investors only need to pay off debt, reduce their mortgage and invest in index funds. This is an overly simplistic statement. Giving advice to the masses over cable TV or radio is always a bad idea, and should be taken as a simple reference point and not be taken as a directive or advice.
Robert Kiyosaki, the famous author of Rich Dad, Poor Dad, with 1.8 million Twitter followers, has made outlandish claims about both financial advisors and the markets. “Financial planners are henchmen for banks and mutual funds. They sell you their products, take your money, charge you fees, and use your money to get richer” was his post on twitter. In reality, there are almost no financial planners that work for mutual funds and only a small percentage work for banks. A large percentage of financial planners are in fact not licensed to sell any security, only create a plan.
In September of this year, Kiyosaki told Kitco news that October 2021 would bring the “biggest stock market crash in history”, according to Yahoo news. Of course, the market did not crash, in fact it went up appreciably. In that same interview, his only three recommended investments right now were Gold, Silver and Bitcoin. Conveniently, Kiyosaki is currently featured in cable TV ads helping endorse investment products, notably a Gold fund.
Bashing financial advisors, while a common marketing tactic by some, is contradicted by a growing body of reputable research organizations. Vanguard, Morningstar, Financial Engines/Aon Hewit, and many others have produced reports for over a decade illustrating that investors enjoy a 3% annual increase in returns, on average when using a financial advisor.
It is worth noting that Vanguard and Morningstar do work with financial advisors, but importantly serve a very large group of self-directed investors and have since their inception. Claims that their research is biased to advisors would not be clear cut.
When groups of people or pundits disparage an entire profession, be it financial advisors or any other, it pays to look deeper at the source. Lack of perspective or ulterior motives could be the driver of the criticism.
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