How much longer can you afford to hold onto your financial adviser?
By Stephen Pate, NJN Network, Charlottetown, PEI, Canada March 13, 2009
with story from Investor Home
The stories of stock professionals losing piles of our money and getting rich are piling up. Professional investment guru Bernie Maldoff couldn’t make money for his clients so he stole it, all $50 billion. The Quebec Pension Plan advisers were so smart they lost $39 billion. The PEI Master Trust advisers only lost something around $500 million in pension money and counting. Who are these financial advisers and why do we pay them to lose our money?
In his book A Random Walk Down Wall Street Princeton Professor Burton Malkiel said that “a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.” The link to Investor Home more or less proves that 10 years of research proved the point. Financial advisers are terrible at picking stocks and making money.
The investment people used by the PEI CSSF, which lost the reported $275 million, are big names: Beutel Goodman and Company Ltd, MacLean Budden Limited, Northwater Capital Management Inc, Templeton Management Limited, Capital Guardian, Burgundy Asset Management Ltd. Those companies have big, fancy offices with lots of MBA’s running around losing money for all of us. They are professional money losers. They charge the Province, you and I big fees to lose our money. They live in million dollar houses in fancy neighborhoods in Toronto while losing our money.
A friend said last year “If you find a good financial adviser, keep him. There are good ones out there. Keep the good ones.” That is a pretty hopeless strategy. If rich people like Steven Spielberg with all his lawyers and accountants can’t find a good investment adviser. what hope is there for you and me. If the Quebec and PEI governments can’t find smart ones, how about us? We are afraid to trust ourselves because the financial industry says they are smarter.
I used to have several of those financial advisers until I took my company public on the stock market and saw how the system works. Financial advisers are salesmen. They get paid commission to convince us to buy whatever inventory their bosses have on the shelf.
If RBC Dominion has a new stock to push – lettuce in the produce department – they have to sell it quick before it goes bad. That means, before we learn the company is a dud. So on Monday morning all the investment advisers listen to a head office conference call, or read an email, or fax that says “Sell this stock or these bonds or these mutual funds this week.”
At that point your financial adviser and my financial adviser starts selling. They call us up and give us hot tips. If that doesn’t work, they make suggestions, take us to lunch or start leaning on us to buy the lettuce before it goes bad.
I’ve had lots of financial advisers. They all drove nice cars, took months off to sail the Caribbean and lived in luxury to convince me they knew how to make money. What they knew was how to take my money. I fired the bunch of them. 100 monkeys can pick stocks better. And the monkeys only eat bananas.
I didn’t lose $50 billion or $500 million last year. Last spring I heard lots of people saying “the best is yet to come” and several worrywarts saying it was a bubble. So I sold my stocks and invested in GIC’s that were insured against loss. I did it last spring. Sadly, I only made 2.5% on my small investments. But then I didn’t lose a cent. PEI Treasurer Wes Sheridan could use some of that practical advice.
Leave a Reply