In light of recent events e.g. Storm Financial … can you please enlighten me on why?
No disrespect, but I have never understood why you would actually need someone to tell you where to put your money with the wealth of information out there.
Now considering that I work in the industry, I may be quite knowledgeable myself about the markets and investing compared to your average teacher, dentist, or soccer mum … however you don’t really need one … honestly.
How the industry works
Do you guys know what they actually do? All they do is try and get access to your hard earned money, and then distribute it to fund managers for a fee … sort of like a middle-man. With the conflict of interest at stake, I don’t know how they can actually really make money for you.
Sometimes the advice and distribution they perform have ulterior motives to it because they get paid a fee (or kick back) by certain asset managers for distributing money to them, even though it’s bad for you financially long term. For example, Storm Financial – they utilized gearing on your assets (in this case the mortgage) to promote/market savings via tax breaks. Often the leverage that some of these advisors ask you to take on is insane!!!
Me personally I don’t think people should be leveraging beyond 20% of their net worth.
Managing your own money
If you want to manage your own money it’s simple:
1. if you know something about the markets then do your own research and invest accordingly with a broker
2. if you don’t know anything, or have no time, you should just put it in an index fund that has shown to perform quite well over the past and don’t touch it – set and forget – a bit like your super. Index funds are very low cost and effective – like less than 1% p.a in cost.
For example the S&P 500 index – it has produced returns over the long term (10-20 years) of about 8-11%. Most index funds do better than 50-90% of fund managers out there … and if you take into account all the fees that fund managers, financial advisors, and fund of fund advisors charge (probably like 3-5% altogether), then index funds will probably out perform 90% of the sincere “helper” strategy promoted by these advisors.
Other forms of advice
If you need tax and estate planning advice, then you should just see an accountant or a lawyer. No need for financial advisor.
So please enlighten me … Why do you or any body use financial advisors? Is there any advantage at all?
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