“I Don’t Understand How This Is Not Diversified!!”
AXA financial advisor, Sept. 5, 2008
A story of the investment industry keeping their brokers in the dark…
I had a trying phone call from a professional acquaintance on Thursday, Sept. 4th, 2008 and I would like to share it with you.
Kathy was frustrated. She had been asking David, their advisor the same questions over and over again without getting an answer. Mike felt David didn’t have the expertise they needed.
Mike and Kathy wanted to know if they were headed in the right direction. So we did an analysis of their portfolio.
What did the analysis tell us? They had no diversification at all. They only had their money in three kinds of investments.
Second their costs in some cases were as high as nine percent, not the one percent David told them about.
In returns, they would be out nearly $8,000,000 if they continued to go down the path David had laid out for them.
The analysis had answered Kathy’s questions and confirmed Mike’s suspicions. They were with the wrong guy.
They had to tell David they were terminating their business relationship.
At that conversation, David wanted to know what they were doing and why. He wanted to make certain his clients and friends weren’t making a bad decision.
He called me and wanted to meet with me in front of his clients to have me explain what he was not seeing. Professionally, I knew he was trying to not lose clients, and I feared a hostile debate. I declined the invitation.
A one on one meeting didn’t seem like a good idea either. Mike and Kathy had already made their decision.
However, we did have a one on one conversation the next day.
Nervously, I asked David a few questions.
I asked him if he understood how brokerage houses managed money. He admitted he did not.
I asked when a mutual fund or annuity traded a stock, to whose advantage was it done for: the investors or the brokerage house’s? He answered the brokerage house.
I asked if an individual could consistently pick the best stocks and stay away from the losers how wealthy they would be? He answered, billions.
I asked, “If an individual could consistently produce returns of 30%, 40%, and even 50%, would they trade that income for a career paying less than one percent as is the case with mutual fund managers? He chose the one making 30%, 40%, and 50%.
David said that he felt speculation was natural by product of how funds produced returns.
When I asked him if anyone could consistently predict the future he said no.
Then we got to diversification
He said he didn’t understand how with a portfolio of real estate, bonds, stocks, etc. how there can be so little diversification.
I asked him if he ever saw what those funds were investing in. He said “no.”
David, just like so many, is a victim of the investment industry. He is caught in the fog.
This episode put some questions in my head. It’s one thing for the Investment Industry to keep the investors in the dark, but, why would they leave their advisors in the dark?
A while back I came to an understanding about the investment industry. The reason they were keeping investors in the dark was because they couldn’t afford to do it any other way.
Now I am coming to the same conclusion about how they train their advisors.
It appears as though there is not enough money in it to properly train their advisors.
It’s a bottom line driven industry, and if it isn’t adding to the investment industry’s bottom line time doesn’t get spent on it.
More than ever I am convinced that in order to get out of this trap investors need to be dealing with an independent coach, and they need to get the answers to the 20 must answer questions for gaining peace of mind.
www.coachgee.com
Welcome New Clients
Mr. Robert Kotsur
Mrs. Elena Casacio
Mr. & Mrs. David Chassey
AXA financial advisor, Sept. 5, 2008
A story of the investment industry keeping their brokers in the dark…
I had a trying phone call from a professional acquaintance on Thursday, Sept. 4th, 2008 and I would like to share it with you.
Kathy was frustrated. She had been asking David, their advisor the same questions over and over again without getting an answer. Mike felt David didn’t have the expertise they needed.
Mike and Kathy wanted to know if they were headed in the right direction. So we did an analysis of their portfolio.
What did the analysis tell us? They had no diversification at all. They only had their money in three kinds of investments.
Second their costs in some cases were as high as nine percent, not the one percent David told them about.
In returns, they would be out nearly $8,000,000 if they continued to go down the path David had laid out for them.
The analysis had answered Kathy’s questions and confirmed Mike’s suspicions. They were with the wrong guy.
They had to tell David they were terminating their business relationship.
At that conversation, David wanted to know what they were doing and why. He wanted to make certain his clients and friends weren’t making a bad decision.
He called me and wanted to meet with me in front of his clients to have me explain what he was not seeing. Professionally, I knew he was trying to not lose clients, and I feared a hostile debate. I declined the invitation.
A one on one meeting didn’t seem like a good idea either. Mike and Kathy had already made their decision.
However, we did have a one on one conversation the next day.
Nervously, I asked David a few questions.
I asked him if he understood how brokerage houses managed money. He admitted he did not.
I asked when a mutual fund or annuity traded a stock, to whose advantage was it done for: the investors or the brokerage house’s? He answered the brokerage house.
I asked if an individual could consistently pick the best stocks and stay away from the losers how wealthy they would be? He answered, billions.
I asked, “If an individual could consistently produce returns of 30%, 40%, and even 50%, would they trade that income for a career paying less than one percent as is the case with mutual fund managers? He chose the one making 30%, 40%, and 50%.
David said that he felt speculation was natural by product of how funds produced returns.
When I asked him if anyone could consistently predict the future he said no.
Then we got to diversification
He said he didn’t understand how with a portfolio of real estate, bonds, stocks, etc. how there can be so little diversification.
I asked him if he ever saw what those funds were investing in. He said “no.”
David, just like so many, is a victim of the investment industry. He is caught in the fog.
This episode put some questions in my head. It’s one thing for the Investment Industry to keep the investors in the dark, but, why would they leave their advisors in the dark?
A while back I came to an understanding about the investment industry. The reason they were keeping investors in the dark was because they couldn’t afford to do it any other way.
Now I am coming to the same conclusion about how they train their advisors.
It appears as though there is not enough money in it to properly train their advisors.
It’s a bottom line driven industry, and if it isn’t adding to the investment industry’s bottom line time doesn’t get spent on it.
More than ever I am convinced that in order to get out of this trap investors need to be dealing with an independent coach, and they need to get the answers to the 20 must answer questions for gaining peace of mind.
www.coachgee.com
Welcome New Clients
Mr. Robert Kotsur
Mrs. Elena Casacio
Mr. & Mrs. David Chassey
No comments:
Post a Comment