What Happened When Alex Kenjeev Paid His Student Loan in Cash
What's a Realistic Retirement Age?Jonathan Clements has a piece [subscription] in yesterday's Wall Street Journal about how some financial advisers manipulate their current and prospective clients. He talks about tactics such as asking for a large investment first, so that a smaller investment will seem reasonable when it might not have originally. (In psychology, this is known at the door-in-face technique.) He also talks about how advisers will feign friendship or attempt to rush clients into investing with a "scarcity pitch."
One thing he doesn't discuss: Why use a financial adviser at all, since they are all basically salespeople? After the large fees that they extract and the strong unlikelihood of their providing superior returns, most investors would be better off picking index funds for themselves. Bottom line: Rather than trying to find ways to deal with their sales pitches (such as giving yourself time and avoiding snap decisions), why not just avoid them all together?
Investment advisers are business-people who seek to maximize their own profits. (For an excellent piece by John Bogle about how many mutual funds work, click here.) The single largest factor in determining your returns is the expense ratio, and advisers simply tack on another set of fees, which reduces your return. Enterprising investors willing to do minimal research can probably do better without them.
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