Did your financial advisor called you up this summer to take some profit?

[funkylist]

Mine didn't. :cry:

[asdfvcx]

Did he call you anytime in 2007 and advise you to take some profits? How about 2006? 2005? 2004???

If not, why would you expect him to call in the summer of 2008? If you believe that financial advisors has some magical insight into the movements of the markets and can predict crashes, you're unfortunately quite wrong. They're just as good at market timing as the rest of us (which means they're not.)


Now, if your portfolio was outside the asset allocation bounds that both of you agreed on, then maybe you have something to complain about. But if it was outside the range in 2008, it probably was outside the range for the last couple of years. So, this wouldn't be a new problem with your advisor.

[tng11]

Yes, my CIBC advisor called me up sometime in May to take profit on some investments. It was only $5,000 though.

[Thalo]

If you started investing in 2003 with a 60%/40% ratio of equities to income then in 2007 you would be something like 80/20 because your equities outgrew your fixed income and a good advisor would tell you to rebalance back to 60/40 to reduce your risk exposure back to your proper risk tolerance.

They will not tell you to simply take profits just because. The markets are relatively efficiently priced, so if the market knew that it was overvalued then it would devalue. An advisor who tried to time the markets and told you to get completely out of equities could get in a lot of trouble, say if he did that in 2005 or 1998.

[tbtaoufiq]

the Job of a financial advisor is to respect and rebalance the client's portfolio every year. there is no financial advisor who will call to sell all equity and buy fixed income.and i think in the summer of 2007, no customer will follow the FA advise to sell equity : why are you asking me to sell if i made 12% in the last 5 years??? this is the answer for Mr client.but after what happened, the same Mr client : why you didn't push me to sell my stocks and buy GIC???.

There is no real theory about Market timig, just stay invested in the market and respect the asset alocation and your risk tolerance.

[Thalo]

the Job of a financial advisor is to respect and rebalance the client's portfolio every year. there is no financial advisor who will call to sell all equity and buy fixed income.and i think in the summer of 2007, no customer will follow the FA advise to sell equity : why are you asking me to sell if i made 12% in the last 5 years??? this is the answer for Mr client.but after what happened, the same Mr client : why you didn't push me to sell my stocks and buy GIC???.

There is no real theory about Market timig, just stay invested in the market and respect the asset alocation and your risk tolerance.

Really, the financial advisor's job is to talk sense into emotional investors, basically to be their psychiatrist. If successful, the investor puts aside fear and greed and invests strategically and makes money in the long term. What I expect to happen next year though, as advisors get their clients to rebalance from overweight fixed income portfolios is a push back "why should I buy these lousy stocks/mutual funds that lost me so much money last year?"

[dealzuser]

the Job of a financial advisor is to respect and rebalance the client's portfolio every year.

There is no real theory about Market timig, just stay invested in the market and respect the asset alocation and your risk tolerance.


Really, the financial advisor's job is to talk sense into emotional investors, basically to be their psychiatrist.


You are both wrong. The job of a financial advisor is to sell you more financial vehicles and instruments. It's great if they go up because then you wouldn't sell the stuff he sold you and you may buy more. But if they go down, he's there to talk you into staying invested so that he continues to get paid. They'll only tell you to rebalance when you've owned your backend fund for 5-6 years and he stops getting paid. That's when he'll "rebalance" you to another mutual fund so that he'll get paid again.

People say "buy low, sell high". You should be advised to sell when it's high, not always buying. But a financial advisor is more similar to a real estate agent than anything else - it's always a good time to buy. It will always appreciate in the long term.

That's why if you stayed invested in TSX for the past ~5 years, you've made nothing. If you bought last summer, you're down ~40%. You're suppose to take profit when things are good, and buy more when things are bad (like now.)

Peoples!!! YOU have to take responsibility for YOUR MONEY! Get educated about products and read the business news. No one is responsible for YOUR MONEY except yourself!!!

[tbtaoufiq]

[QUOTE=dealzuser;7781427]You are both wrong. The job of a financial advisor is to sell you more financial vehicles and instruments. It's great if they go up because then you wouldn't sell the stuff he sold you and you may buy more. But if they go down, he's there to talk you into staying invested so that he continues to get paid. They'll only tell you to rebalance when you've owned your backend fund for 5-6 years and he stops getting paid. That's when he'll "rebalance" you to another mutual fund so that he'll get paid again.

You re actually saying that all the FA in the the world are not honest, common. there is somme FA who do what you re saying but not every body. and for your information : not all FAs are paid on commission, and not all FAs advise MF with DSC Fees.it depend if the f
FA want s to get a max now and don t care about you after, or if he wants to build a relationship with you.
by the way, all the FA and Financial planner who works for banks are paid in commission, yes, but doen t depend on what the sell and are not even allowed to sell Mutal fund with DSC fees. it depend on how much they bring to the bank!!!

[dealzuser]

You re actually saying that all the FA in the the world are not honest, common. there is somme FA who do what you re saying but not every body. and for your information : not all FAs are paid on commission, and not all FAs advise MF with DSC Fees.it depend if the f
FA want s to get a max now and don t care about you after, or if he wants to build a relationship with you.
by the way, all the FA and Financial planner who works for banks are paid in commission, yes, but doen t depend on what the sell and are not even allowed to sell Mutal fund with DSC fees. it depend on how much they bring to the bank!!!


I am NOT trying to judge whether this Financial Advisor or that Financial Advisor is honest or not. What I AM trying to say is that the Financial Advisor's goals (make more money for THEMSELVES) and your goals (grow your investment) are NOT the same.

Financial Advisors are SALES people. Treat them as such. Don't expect objective advice. If you think you have a different relationship, then all power to you.

You seem to contradict yourself whether they get commission or not (underline in your post quoted above). Regardless, let's agree that financial advisors get paid more when they sell more products to you. They get paid more when they have more accounts. Therefore, their effort is spent meeting and getting new clients or getting existing clients to buy more (as sales people do) and not watching your investment or not advising you when to buy and sell (as advisors should do.)

I am NOT saying they are evil (just like sales people are not evil). But they are SALES PEOPLE. Make your own plans and your own financial decisions. I cannot emphasize that enough.

[smartcdn]

Mine didn't. :cry:

OP: certainly a good topic but also check this out from a while back...
http://www.redflagdeals.com/forums/showthread.php?t=647122

btw was public voting (making everyone see how you voted) really necessary?

[dash riprock]

I am NOT trying to judge whether this Financial Advisor or that Financial Advisor is honest or not. What I AM trying to say is that the Financial Advisor's goals (make more money for THEMSELVES) and your goals (grow your investment) are NOT the same.

Financial Advisors are SALES people. Treat them as such. Don't expect objective advice. If you think you have a different relationship, then all power to you.

You seem to contradict yourself whether they get commission or not (underline in your post quoted above). Regardless, let's agree that financial advisors get paid more when they sell more products to you. They get paid more when they have more accounts. Therefore, their effort is spent meeting and getting new clients or getting existing clients to buy more (as sales people do) and not watching your investment or not advising you when to buy and sell (as advisors should do.)

I am NOT saying they are evil (just like sales people are not evil). But they are SALES PEOPLE. Make your own plans and your own financial decisions. I cannot emphasize that enough.

the economic model for most FA's(not fee based) is to get you into mutual funds where they get a trailer fee. This model means that no matter the market conditions, they get a base salary contingent upon the assests under their control. So, they are better off if the market goes up, but still earn an commission if the market goes down. This trailer fee model is what Manulife one probaly considered when they schemed how they would compensate FA's and insurance agents for referring their clients. Base commision then a trailer on monthly balance.

[Thalo]

It's true that advisors get payed trailing comissions as long as you own a fund and they stop getting pid those comissions when you sell it, however usually the reason they advise you to stay invested is because when they recommended the fund to you, the objective was long term growth and you were made well aware of the potential volatility of the fund along the way. Now, you've experienced the worst side of that volatility and your emotions tell you to sell. The advisor is there to remind you of your original objectives and to stay invested and not destroy wealth by selling at a low.

[i6s1]

If FAs acted in the best interests of their clients, they wouldn't be telling them to buy mutual funds. Ever. QED.

Pay hourly for your advice.

[sjweyman]

My father is a FA with CIBC Wood Gundy and gets paid comission on all sales. I know he doesn't encourage people to buy mutual funds or anything else because of the comission he will receive.. He is genuinely interested in helping people with their financial objectives and long term growth. He tells people to buy when it makes sense and sell when it makes sense for their financial objectives. He knows that his clients will have to buy some times and sell other times so he is going to be making money. New IPOs and investment opportunities come around all the time.

Of course, he has been in the game a long time (he's 58) when being an investment advisor meant more than it does today and has well established clients with large accounts so he's not worried about drumming up new business or anything like that. He hasn't taken on small accounts for many many years (except mine) because he has no need to do that. We don't talk in depth about how he does his job all the time or anything ... but I do know my dad and I know he is 100% trustworthy. I've heard him talk of good periods of income and bad periods of income but I've never once heard him hint of increasing or decreasing sales just to make extra cash.

My only point is that good FAs do exist out there that are 100% aligned with your interests even though they can get paid more for going against your interests ... but good luck finding them! However, when you think about it ... by producing bad returns for clients or causing them to buy/sell too much you will make people suspicious and lose clients anyway and then have to spend a ton of time getting new ones. So acting in the best interest of your client just makes sense anyway most of the time.

All that being said, knowing how to manage your own money is definitely a good thing as well because no FA can spend an insane amount of time looking after just your portfolio ... only you can do that.

[setell]

My father is a FA with CIBC Wood Gundy and gets paid comission on all sales. I know he doesn't encourage people to buy mutual funds or anything else because of the comission he will receive.. He is genuinely interested in helping people with their financial objectives and long term growth. He tells people to buy when it makes sense and sell when it makes sense for their financial objectives. He knows that his clients will have to buy some times and sell other times so he is going to be making money. New IPOs and investment opportunities come around all the time.

Of course, he has been in the game a long time (he's 58) when being an investment advisor meant more than it does today and has well established clients with large accounts so he's not worried about drumming up new business or anything like that. He hasn't taken on small accounts for many many years (except mine) because he has no need to do that. We don't talk in depth about how he does his job all the time or anything ... but I do know my dad and I know he is 100% trustworthy. I've heard him talk of good periods of income and bad periods of income but I've never once heard him hint of increasing or decreasing sales just to make extra cash.

My only point is that good FAs do exist out there that are 100% aligned with your interests even though they can get paid more for going against your interests ... but good luck finding them! However, when you think about it ... by producing bad returns for clients or causing them to buy/sell too much you will make people suspicious and lose clients anyway and then have to spend a ton of time getting new ones. So acting in the best interest of your client just makes sense anyway most of the time.

All that being said, knowing how to manage your own money is definitely a good thing as well because no FA can spend an insane amount of time looking after just your portfolio ... only you can do that.

Got a question, how are you so sure your dad is a 100% trustworthy FA if you guys don't talk about what he does? To you he may be a 100% great person and you trust him but to his clients he might not be that 100% wonderful guy!

[Thalo]

Got a question, how are you so sure your dad is a 100% trustworthy FA if you guys don't talk about what he does? To you he may be a 100% great person and you trust him but to his clients he might not be that 100% wonderful guy!

Guaranteed some of his clients aren't in love with him right now.

[sjweyman]

Got a question, how are you so sure your dad is a 100% trustworthy FA if you guys don't talk about what he does? To you he may be a 100% great person and you trust him but to his clients he might not be that 100% wonderful guy!

We do talk about it ... I just don't pry into the private matters of his clients. We keep it at a pretty high level. I also had almost 0 knowledge of investing until recently when I took a greater interest so it was hard to go in depth because it just would have gone over my head.

What I'm saying is that we talked about it enough for me to know that my father doesn't push people into buying or selling simply to make a profit. He also doesn't stick to investments that give him some sort of trailing benefit either. He does believe in investing for the long term and picking solid companies for long term growth. Doing so definitely causes a decrease in transactions not an increase so because of that it would further reduce his comissions. None of these things or the strategies he supports has ever made me think he has anything else but the client's best interests in mind. Not only that, but in life he lives well under his means. I know he make a very large income but he doesn't spend like it.

[sjweyman]

Guaranteed some of his clients aren't in love with him right now.

I'm sure some of them aren't ... but not most of them I don't think. Nobody likes to see their accounts shrink dramatically but I know he would have discussed these risks in detail with all of his clients before this recession hit. He's lived through several major corrections so he knows what it is all about and the risks involved. I'm also sure none of his clients were improperly weighted in equities to ruin their investment objectives or retirement plans.

Anyway, just trying to represent the other side of the coin because people here seem to think the only way to properly invest is through your own research and reading books by certain authors. I'd say that advice is pretty sound but that there are definitely good FAs out there and that even though their interests seem stacked against yours it isn't always the case. It just means you need to be very careful when choosing an FA. Things like honesty, integrety, and the desire to help others do still exist in this world.

[setell]

We do talk about it ... I just don't pry into the private matters of his clients. We keep it at a pretty high level. I also had almost 0 knowledge of investing until recently when I took a greater interest so it was hard to go in depth because it just would have gone over my head.

What I'm saying is that we talked about it enough for me to know that my father doesn't push people into buying or selling simply to make a profit. He also doesn't stick to investments that give him some sort of trailing benefit either. He does believe in investing for the long term and picking solid companies for long term growth. Doing so definitely causes a decrease in transactions not an increase so because of that it would further reduce his comissions. None of these things or the strategies he supports has ever made me think he has anything else but the client's best interests in mind. Not only that, but in life he lives well under his means. I know he make a very large income but he doesn't spend like it.


I'm sure some of them are ... but not most of them I don't think. Nobody likes to see their accounts shrink dramatically but I know he would have discussed these risks in detail with all of his clients before this recession hit. He's lived through several major corrections so he knows what it is all about and the risks involved. I'm also sure none of his clients were improperly weighted in equities to ruin their investment objectives or retirement plans.

Anyway, just trying to represent the other side of the coin because people here seem to think the only way to properly invest is through your own research and reading books by certain authors. I'd say that advice is pretty sound but that there are definitely good FAs out there and that even though their interests seem stacked against yours it isn't always the case. It just means you need to be very careful when choosing an FA. Things like honesty, integrety, and the desire to help others do still exist in this world.

Not picking on you but you're contradicting yourself. You first say your conversations with your father are at a fairly general level than when you responded to Thalo's post you say you're sure his clients haven't invested heavily in equities hence his client's aren't affected by what's happened with the market. It's not just the equities that are tanking these days, the whole market is on a downward slide.

You also said he's discussed things with his clients before the recession hit. If he knew the recession was coming before it was here I'll say he should have been a trader instead of being a FA. If you got that kind of insight you can make way more than a FA can ever make! Btw we are in a recession right now if you didn't know.

I get the sense you're defending FA's because of how you feel for your father. I have nothing against that but it's just that your points got a few holes in them that's all.

Overall, FA's serve a niche market where people have no clue with investments and they need FA's to guide them. It's just that most people on rfd are a bit more savy than the general public with finances so what most FA's can offer to their clients are things rfd members can do it themselves if not better.

[sjweyman]

Not picking on you but you're contradicting yourself. You first say your conversations with your father are at a fairly general level than when you responded to Thalo's post you say you're sure his clients haven't invested heavily in equities hence his client's aren't affected by what's happened with the market. It's not just the equities that are tanking these days, the whole market is on a downward slide.

You also said he's discussed things with his clients before the recession hit. If he knew the recession was coming before it was here I'll say he should have been a trader instead of being a FA. If you got that kind of insight you can make way more than a FA can ever make! Btw we are in a recession right now if you didn't know.

I get the sense you're defending FA's because of how you feel for your father. I have nothing against that but it's just that your points got a few holes in them that's all.

Overall, FA's serve a niche market where people have no clue with investments and they need FA's to guide them. It's just that most people on rfd are a bit more savy than the general public with finances so what most FA's can offer to their clients are things rfd members can do it themselves if not better.

I guess I'm not being clear because you're misinterpreting me.

I never said his clients aren't affected by this market. Of course they are. I'm sure they've lost a bundle. I'm saying my father is a very solid FA that is aware recessions like this happen and that risk would be built into his clients portfolios. Those who need the money soon would not be invested at a risk level to ruin their retirement plans or overall financial goals. Those who don't need the money soon would have taken a larger loss but should still be on track to meet their longterm goals. Also, I'm pretty sure I never said his clients weren't heavily invested in equities. I'm sure some are and some aren't.

I'm only slightly defending FAs. I'm saying the good ones are probably hard to find but they are out there. I am using my father as an anecdotal example ... but that is valid here because I'm not trying ot prove all FAs are aligned in your best interest ... as they certainly aren't.

I partially agree with your last point. I still think someone with 30 years of experience in the markets and who has their client's best interest in mind will be better at selecting the best companies (they understand the financial data better and read/understand more reports). FAs also sometimes get access to preferred or limited offerings of stock that may be harder for regular Joes trading with their low cost brokerage to obtain. Essentially there's a lot of knowledge and experience there that most people, even the savvy ones, can't easily obtain without working the equivalent of a second job. Reading a few books and having a few discussions with other amateurs doesn't exactly put you on the same page.

[sjweyman]

^

A few more point of clarification. I was trying to say we kept it at a general/high level just so people didn't assume that we talked about everything in detail. It's a confidential business and discussing the minute details of his clients would be unprofessional.

Also when I said I had 0 investment knowledge that would be an exaggeration. If measured on a real scale, until recently, I probably had more investment knowledge than at least 80% of the general population and even probably 70% of the RFD population. Many of the users here are kids and even the older ones aren't always the most mature or well informed. Being able to read a forum and catch a good deal doesn't mean you understand financial markets and know how to invest.

That said, I still believe that my investment knowledge was almost worthless. Just enough knowledge to be dangerous. However, it did make having conversations with my father possible and enough to make judgements about his ability as a financial advisor. On the other hand, if he were to start talking in depth about a company's financials, complicated statistics, and using a lot of technical terms related to his trade then I would quickly get lost unless he was careful to explain everything along the way. This is primarily what I meant by keeping it high level (along with not dicussing the private matters of his clients).

Anyway, I'm sure people are sick of hearing about me and about my father by now so we should let it die.

My overall suggestions for average people would be taking one of a few general approaches to investing (although I'm sure people will dissagree with me as they always do here on RFD):

1) Learn enough about investing to ask the right questions to a FA to figure out if they are worth trusting and let them help you invest.
2) Spend an insane amount of time reading/studying and then spend even more time worrying about your investments as equities fluctuate
3) Learn a little about investing and then diversify and invest in low cost funds / ETFs and trust that the markets tend to rise in the long term.
4) Only buy high yielding guaranteed investments and settle for a small return and know that you should at least keep up with inflation in the long term.