First off, I should disclose that I work as an advisor but I like to think that like many other advisors, I can give unbiased advice that is in an client's best interests.
Sure not all the advisors, be PFP/CFP/RFP/CFA/CLU are biased but the way the industry runs is full of huge conflict of interests.
It's doubtful any aspirational CFP/CFA candidate could get the designation
without relevant 2-4 years work experiences
after passing the exams. Getting work experiences mean preferably selling in-house manufactured financial products and/or 3rd party substitutes with trailer fees as incentives in order to meet aggressive sales targets or increase the size of the books. And for CFA candidate, he or she better helps the clients to beat the benchmark consistently to justify the compensation.
I subscribe to the theory that financial advice is like medical advice: it is very individual and situation specific. There is often no 'best' solution or things you have to absolutely do or don't do in my eyes: it all depends upon the person and their circumstances.
There are certainly advisors who churn accounts to their benefit and their clients detriment but I would suggest there are many more who honestly do their best for their clients first and foremost. There are many fee structures and one must make sure they understand how their advisor is compensated since the client is paying for it one way or another.
That's a classic when the advisor compares his or her job to GP or Specialist. It may be true both professionals participate training workshops/seminiars at 5 stars hotels or resorts sponsored by big corporations and receive free gifts as incentives to use their products but the similarities stop here.
Though it could be possible, it's remain to be seen the doctors get their financial compensation similar to the advisors, say prescribing medicine or selecting medical devices based on the amount of "trailer/DSC fees" received from Pfizer, Eli Lilly, Schering Plough, Merck, J&J, Boston Scientific, Novartis, Roche, Novo Nordisk...etc,
not in the patient best interest or the side effects of the drugs/medical devices.
As far as the fee structure for doctors is concern, almost all of them, private or public practice are
fee-only, not fee-based or on commission. It's remain to be seen doctors depend on their paycheque
exclusively by commission received from the pharmas or restrict themselves to use in-house drugs manufactured by
one pharma company only. An example could be the doctor could not prescribe Lipitor to the patients because he gets his paycheque only from Merck and Merck carries Zocor, which is cheaper but less effective. That's assuming the health insurance companies reimburse either drugs with identical amount.
Moreover, doctors involve life and death situation daily and he or she could be sanctioned severely for malpractice to the full extent of the law without much exception. Doubtful for any advisors to get sanctioned for malpractice involving financial life and death since their employers have tonnes of cash to lobby the politicans to keep the loopholes.
Hinz has probalby had a bad experience and is obviously cynical about the industry and he might very well do better as a DIY'r but many others might not find that the best course of action.
Comparing changing a light buld to providing financial advice is a bit simplistic unless you are talking about rolling over GIC's. What about doctors taking your temperature or the mechanic putting air in your tires? Those scammers!
Never have adviser since I do not have $500K+ investable amount to get his or her attention.
As far as comparing changing a light bulb is concern, I am talking about fee/compensation,
not financial advice. Again one can pay a
lump sum say $2K for few hours to get comprehensive financial advice and after that the client execute the strategies. The client could arrange another time, maybe an hour a year from now to get an update just in case.
Not necessarily good idea for advisor since "fee-only" symbolize commodization of service, while "fee-based" symbolize annuities.
DIY might very well result in lower fees if you do it right but an advisor might be able to help you save taxes; plan your estate; manage debt vs. investments; prioritize financial needs; advise on which kinds of accounts to use; make dispassionate decisions about when to buy and sell; etc.. You might pay more in fees with an advisor but many clients will net out further ahead if they benefit in the ancillary ways an advisor can help.
Again all of these issues could be dealt with by "fee-only" option, like going to Accountants or Lawyers or Doctors but how many advisors would take clients with less than $250K investable amount of cash available in the first place? It's simply not worth the cost.
Plus, no offense but many Canadians are pretty strectched dollar wise and though it makes sense to pay that much for financial advice
seperately, they simply balk and revert to the old ways, i.e. fees for any financial advice, if at all embedded to management fees on the actively managed investments while these fees slowly but surely eat away the performance in the long run.
Many people aren't interested in financial matters or don't have the consistent time to do it themselves. Many are too emotional to be logical about their finances.
No doubt about it but the professionals are no better, even with the best info and technologies at disposal. The institutions, including those big pension funds, endowment funds and soverign funds made similar mistakes, say buying illiquid or faulty investments such as CDO, ABCP, MBS.
Most people could cut their own hair or change the oil on their car but is it a good use of their time or are they better off in seeking out someone to do it for them?
Unlike car maintenance, personal finance is not that complicated. It's just happen to be tedicious and many people are financially illiterate and not incline to get the financial house in order.
One does not need to learn how to spend like crazy. Personal finance on the other hand requires people to have both discipline to control spending and motivation to save and invest for the future.
Hinz raises many good points but he is coming from one angle. While many investors might very well do better by themselves there are indisputably many others who would do worse following his lead and trying to do it themselves. They'll be the ones with horrible haircuts and oil-stained hands...
True but that's not a substitute to be taken advantage of.