A New Breed of Financial Advisor

Deregulation, along with advances in Internet Technology, has spawned an entire new breed of professional advisor.  Fee-only advisors can now operate from any place with a plug-in phone line and an Internet connection, bringing low-cost, independent, objective, professional advice of high quality and sophistication right to the investor’s neighborhood.  The clear separation of the sales or brokerage puts the advisor on the same side of the table with the client.  Wall Street’s abuses have been so frequent, and the advantages of fee-only compensation so obvious, that the demand for the new advisors has fueled explosive growth.  While fee-only is a far better way to deliver service and advice, it doesn’t guarantee competence or even honesty.  Investors must still do their due diligence when selecting an advisor.  Investors should get familiar with the SEC’s website or FINRA.  Both sites offer tremendous information for researching legitimate financial advisors.

All that remains is for the individual investor to take advantage of the gifts he has been given.  Everywhere the investor looks, things are better and growing better still.  But the investor must look.  The brokerage industry, the fund companies, and the media all have no deep commitment to providing fundamental education for the investor.  Bad advice is far more profitable than good advice for nearly all players.  Wall Street’s profits are simply not linked in any way to investor profits.  As long as turnover is high, the Street wins either way.  With almost 20,000 mutual funds clamoring for shelf space and public attention, hype is the order of the day in fund advertising.  And, as long as Americans will buy dangerous drivel posing as serious financial commentary, the medial will happily provide it.

America is a land of shocking financial illiteracy.  Few investors have any kind of long-term plan at all; few recognize the dimensions of the problem facing them, yet most are supremely confident of their abilities.  Most indulge in self-destructive financial behavior and lack even basic discipline.  Predictably the results of this muddle are dismal.  Projecting these results forward generates visions of almost unimaginable financial hardship as the boomers march off to retirement without the financial assets to sustain them.