No Time, Training, or Temperament

by Fern on January 15, 2007

I am now officially a gym rat. I work out twice a week with a personal trainer. It is my main form of exercise since I cannot play tennis, golf, mountain bike, hike, or any of the other things I used to do. I now walk and go to the gym. I did find a gym though that I really like- Axis. I knew I was in the right place when I walked in and saw trainers doing really unusual exercises and I saw machines that I had never seen before.
Right after or sometimes before my session, I walk on the treadmill. There are two televisions mounted high above the row of treadmills and stair steppers, and bikes—just like in the hospital. One television always has a financial station and the other some girly show like the View or Martha Stewart. I face the financial TV wondering what people see in that. Even when I was in the business I never watched that stuff but apparantly millions of Americans do. I don’t know why because most of the advice is biased and the ticker- what’s with that? Who looks at that and why? Even super short term traders know that by the time you are seeing that info on the west coast, the price is now different. So who cares?
I think about the referral I got years ago from a good client of mine. This woman had inherited a lot of money and decided to manage it herself. She got up every morning and turned on some financial TV show and traded on the news that day. She wanted me to do her tax return. She had a pile of papers showing her gains and a pile of papers showing her losses. She totaled each pile up and showed me the small gain she had, and how simple her return would be.
I told her I wish it were that simple. Each trade needs to be broken down to show the gains and losses. That would take hours and the return would cost her quite a bit. She agreed to let me do the return. After digging through the trades, many did not match and I found that she was trading stocks she didn’t even own. The end result was that she had over a $100,000 loss. It was devastating to her but she needed that awakening to realize that she was not capable managing her own money. Yet she couldn’t trust someone to manage it for her since no one could get the returns that she wanted without any of the risk– yeah right.
I used Schwab Institutional Services for my clients and I used to chuckle as I would go into the local branch to deposit a client check and see a row of elderly retired gentleman sitting in the lobby watching the ticker and talking. Very cute way of socializing—– losing your money in the market. Eventually Schwab got smart and redesigned their branches (as well as closed down many).
I was reading the speech former SEC Chair Arthur Levitt gave to NAPFA’s 2006 conference and was very inspired. Here is a quote:
“When I consider today the lack of knowledge among even the most sophisticated people in terms of investments, it really concerns me . A recent report showed that over 50 percent of Harvard’s faculty and staff invest their entire retirement savings in money market accounts. The Los Angeles Times studied what recent Nobel Laureates in Economics did with their money, and said that most of those titans of economics were really terrible investors. One had the bulk of his retirement in a money market account; one spends most of his time on chasing the latest hot investments, from tech stocks to oil stocks; and another spent the entire 1990s with his winnings fully invested in municipal bonds. The fact is that most people don’t have the knowledge, the background, or the termperament to manage their own money.
The so-called Merrill Lynch Rule that exempts brokers from the fiduciary requirements of the Investment Act of 1940 only confuses investors. While brokers will counter that that they are under NASD oversight, they are simply not regulated with the consumers’ interest in mind. They are not required to obtain best execution pricing for trades and are allowed to sell to a client more expensive investment vehicles that will generate greater commissions to the broker. There is absolutely no reason why a fiduciary responsibility imposed upon Investment Advisors should not apply to retail brokers with equal coverage. The notion that a retail broker is an order taker is absolute and total fiction.”
For a real Financial Advisor that adheres to a fiduciary standard, check out NAPFA and/or the Garrett Planning Network

{ 1 comment… read it below or add one }

Fern February 14, 2010 at 7:37 am

Thanks. I have been so busy with writing my ebook -the 401K first aid kit (check it out at . I dropped the ball here. But I am back and I am also going to redesign Whole-Hearted-Way. Whew!

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