I recently attended the CIFPs annual meeting where current trends in the industry where discussed. One of the topics was the strategic move to require all CFPs to put their clients' interests first. On the surface, this seems like motherhood and apple pie. Beneath that surface, however, something far more contentious lurks.
Many advisors shoulder the responsibility of supervising financial independence planning for their clients. What I’m curious about is whether or not they take cost or the method of payment into consideration when doing those projections.
It seems a number of readers have recently either taken my points out of context or missed the point altogether. Lately, I’ve been writing about cost and why it is important to keep expenses down. People have written back and talked about the importance of planning, the randomness of returns for actively managed products and the overall quality of advice they give.
Over the years, many journalists (and only a few advisors) have lamented the comparatively high MERs charged by Canadian mutual fund companies. To date, the real alternatives for ordinary Canadians involved either “sucking it up” and doing nothing or moving toward a higher allocation in individual securities, exchange traded funds (ETFs) and / or index funds.
One area in the field of finance that has been growing in acceptance is that of behavioural economics- sometimes referred to as behavioural finance. In essence, it deals with the various intellectual and emotional errors that nearly everyone fact seems to make. Concepts like overconfidence, negative loss aversion, mental accounting, hindsight bias and anchoring have gained considerable acceptance in the financial services industry.
I hopped on to my computer recently and typed in the phrase “scientific method” into a familiar search engine just to see what came up.
Advisors generally do a good job in helping their clients make smart decisions with their money. Most try to help clients obtain a meaningful understanding of capital markets. Most try to make reasonably suitable recommendations. These advisors will diversify between equity and income, value and growth, small cap, large cap and a number of other ways, too.
I recently read ‘Nudge’ a book about decision-making by Thaler and Sunstein. The book left me with a lasting impression.
The perverse thing about living in a society that’s obsessed with keeping up with the Joneses is people are seldom satisfied. Fulfillment in life can come from any number of activities or pursuits. Many of them (watching your daughter progress as a pianist, running a marathon, staying married) relate back to things that money can’t […]
Tell me if you’ve ever come across this statement before: Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. This is, I’m sure you’ll agree, the standard […]