Monday, November 13, 2006

The Bonus Checks are Flying on Wall Street. Did You Contribute?

Disclaimer: Nothing anywhere in the Unknown Advisor blog is to be construed as as offer to sell any investment product or advisory service or any financial service whatsoever. The material here is for general informational purposes only.

The Unknown Advisor is ready to blog. Today's editorial:

If you did not see the story on Bloomberg, it is titled Never in the history of Wall Street have so many earned so much in so little time. It's a good read, and a reminder for investors.

Every dollar that the huge brokerages make, comes out of someone's pocket. Your pocket, perhaps. As investors, you and I both need to look for ways to invest in cost-efficient ways. And no, we don't begrudge someone a good living. Especially if the service is good. But you want a good living too. And if too much of your portfolio returns are going to an intermediary, you might not have the good retirement you're hoping for, have worked for. All too often, Wall Street's business seems to be making money, lots of it, from investors, rather than for investors or along with investors.

You owe it to yourself, you must either learn how to be a good do-it-yourself investor, without paying for things like load funds' sales charges, old-line full-service high commissions, expensive wrap accounts or separately-managed account arrangements, or greedy advisors with unduly high advisory fees, or the guys who just stick you in some load fund and get on with looking for someone else to do the same thing to. They exist, they are too common. Just say "No, thank you." and escape. Or firmly show them the door.

If you do not have the time, the energy, or the knack, you should get yourself an investment advisor, but if you do, tenaciously search out one with extremely high fiduciary standards and relatively low advisory fees. If they indicate that you do not have sufficiently high assets to be worth their time, (politely, let's hope,) ask them for a recommendation of a good fiduciary advisor who will work for you.

Stock brokers are not fiduciaries. People who sell you load funds, heavily-commissioned variable insurance products or heavily-commissioned annuities are not fiduciaries. People who sell you limited partnerships are not fiduciaries. All of these are really just salesmen. They may be nice salesmen. If they put your interests first, they will not meet their goals and will soon be unemployed salesmen. Fiduciaries, real fiduciaries, put your interests first, and know enough about the lamentable investment performance of those kinds of things to decide not to be commission-junkies, and to look for ways to work in the investments realm which allow them to give clients things which have a better chance to work well. I guess you could say they have a serious case of scruples.

It has been said that the best financial advisors have the lowest advisory fees and the worst advisors have the highest fees. I didn't say it first, but I wish I had. It's counter-intuitive, but true, in the Unknown Advisor's opinion.

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