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The recent bear market should have opened the
eyes of investors, making them realize that you
can't possibly think someone else, such as a financial
advisor or broker can care more about your financial
situation than you do. Now that investors have
lost in some cases over 80% of their retirement
accounts, all that these so called "advisors"
can do is put their hands up in the air and say
I was wrong. That is simply not good enough for
clients who have trusted that professional for
10, 15 or 20 years. I know people that literally
had to put retirement plans on hold and go back
to work because they can't financially support
themselves after these losses.
Brokerage firms teach their brokers to advise
clients that thinking long term by making them
sit in mutual funds for years and years is the
way to come out ahead. This is done in an attempt
to easily control that client for a long time
while continuing to collect commissions no matter
if your money is growing or not. What if after
years, your funds didn't grow enough to meet your
goals? When we have a market fallout like we did
a few years ago, advisors simply say, "that's
ok, we planned for these ups and downs, now we
have to stay invested and wait for it to go up".
They are preying on a person's fear. "If
I leave this advisor, will I be wrong"? This
keeps most investors with an advisor for much
longer than they need to be. There is no excuse
for having major losses like this, it is simply
the advisor's fault. You either were not diversified,
the investment choices were poor or they didn't
take profits and manage losses properly.
Believe it or not, the main problem is that brokers
and advisors don't know enough about the investments
they are recommending. The major brokerage firms
influence their brokers by pushing whatever product
they want clients to buy. They will even sponsor
nice lunch meetings with the sales staff, so the
brokers rally behind this product and then immediately
sell as much as possible to their clients. These
recommendations are regardless if the investment
is appropriate for the client or not. The brokerage
firm will even offer contest incentives to those
that push the most product. Does this type of
selling seem like it has the investor's best interest
in mind? Then once you buy it, they make sure
you feel comfortable just sitting there not making
any major decisions and hoping the advisor knows
what he is doing. It's about time people knew
that there is nothing glamorous about a financial
advisor or stock broker, they are simply over
glorified salesmen. Most couldn't predict the
correct direction of a stock if his or her life
depended on it. And independent financial advisors
do the same thing. They may not have a large firm
telling them what product to push, but they have
several mutual fund choices to pick from, each
offering incentives or certain commissions for
using their fund.
And why all the mutual funds? Because they are
easy to sell and the broker doesn't have to worry
about getting calls every day from annoying clients
wondering if the 50 shares of some stock they
just bought is going up or down. Mutual funds
are for the long term they tell you, so you are
supposed to sit and wait. The most ironic thing
about mutual funds is that they claim to be long
term investments, but the fund managers are actively
trading in and out of positions daily without
the client even realizing. But these brokers tell
you that active trading is dangerous. Why? Because
they do not have the know how to manage such an
account, having to give you advice sometimes intra
daily. They also have no interest in actively
managing such an account. It takes up way too
much of their time to baby sit a bunch of clients,
but more so, they do not have the expertise to
correctly advise you of what to trade or how to
manage risk. What an advisor wants is to put everyone
in the same few long term investments and review
everyone's portfolio once a year. Then, they can
sit back and manage more clients and more assets,
collecting a small percentage on those assets
for their trouble. Minimal work for maximum gain.
And what if you are ready to retire after waiting
for 20 years through a good market and the bubble
bursts like it did a few years ago and suddenly
you have only a fraction of your retirement account
left? What then? You work some more? Is this a
position you want to be in after all is said and
done, because you put faith into some other person
looking after your finances? How much attention
do you think you will receive from a so called
"full service" broker? The really savy
ones will call you after they haven't spoken to
you in a few months and tell you about a great
new mutual fund that he heard of over "lunch"
and advise that you buy some. So, after he just
railroaded you for a 5% percent fee on the last
mutual fund, he will take your money out of the
fund he just sold you and pop you into another
one, so he can earn another 5% on the same money.
Not only is this immoral, it's also illegal. And
it's done everyday.
Anyone with an interest in being a successful
investor needs to learn how to do their own research
and make their own trades. In today's market,
you must be an educated, active trader who has
more knowledge than most retail brokers or financial
advisors. If you can do that, you will be a wealthy
investor. If not, you will simply be an average
investor or perhaps even worse if you allow the
market to control you instead of controlling the
market.
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