Financial Advisors

how many fee only fiduciaries have fired themselves,after a bad year(2007-09).If being a fiduciary is truly putting our clients best interest first, how can you truly be objective when you're mng acct

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works at

Must be an annuity guy...

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I hire managers for my clients with the expectation that they will beat their index, over a market cycle, by having higher returns or lower risk. My clients hire me to: manage their accounts, pay their bills, coordinate with estate attorneys, coordinate with CPA’s, be the bad guy in spending conversations with their spouse/child/parent etc. basically I get paid to do a lot more than just beat a benchmark. The managers I hire do not have that same value proposition. That’s how I justify my fees. If someone comes in and all they want to pay for is performance then I recommend an etrade account

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Huh?

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Not at all. Just wondering how many other fiduciaries see the inherent conflict faced when we try to act as the portfolio manager ourself.

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@ ubs1 Exactly! Lol, that was my point. Too many people want to be portfolio mngrs. By doing so, it creates a void of true objectivity.

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It’s worth remembering that, while client care about returns, they mainly are looking for someone to care about them. Take a note from the medical industry. Surgeons who are considered “personable” and connect with their patients are sued at a much lower level than those surgeons that are “detached”. Even if they have a HIGHER mortality rate during surgery. People know you are not perfect and want you to care. If you sell yourself as a person then your clients will treat you as a person. If you sell yourself as an index beating machine then your clients will treat you as a machine...I.e. disposable.

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The same argument would mean you should work for free. Everyone should work for free. Hiring a third party money manger doesn’t eliminate any of it. Coaches get fired just like the players. If the whole portfolio stinks, it doesn’t matter if it was managed money, a self crafted portfolio of some wizardry, you’ll get canned by the client.

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Possibly, but at nit probably, if we're doing our job. None of us can control the markets. But we can control the amount of risk a client takes. If they know their max draw down is 5 or 6 % & our portfolio lose that, which will happen eventuality. Are they upset about the loss? Possibly, but they were made aware of their max loss exposure to begin within, and it's 100% of the time less than they were initially exposed to. Clients never worked for free, and neither should we. If they want fee-less ,they are more than to use vanguard or fidelity indexes.the problem is they are now exposing their money to losing 15-50% in order to potentially average 4.25%-7%. I've yet to hear someone tell me they felt it was in their best interest to risk more loss necessary to accomplish the same potential outcome.

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The point is that only you know if you are being objective and acting as a fiduciary. You answered your own question, you can’t control the market. If you have a third party mgr or not is irrelevant. Firing a mrg with the premise of a downturn is nonsensical. I don’t even know why you’d fire them if they had a bad year. Bad in terms of what? Market downturn? That’s bad management of the advisor. The plan should be stress tested and “planned” for in that scenario. A lot of advisors I know would be more than happy to have a third party mrg to blame/fire. Or make a change — because that’s what people do when they are uncomfortable — blame or change.

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I'm confused. How is firing a mngr based on drawdown nonsense? If anything is common sense. Yes, stress testing should be a basic process in your initial duedilligence process. But that doesn't eliminate that fact that is never in a person's best interest to take more risk than necessary to achieve the same ror at the end of the day. You don't fire the mngr for losing money, we all do that. You fire a manager for numerous reasons. Maybe they aren't hedging an area you feel is a threat. Maybe they are bound, within their prospectus to keep 60-80% of funds invested at All times, forcing your client into a buy/hold strategy at a time they need to be moving into cash. Maybe the mngr. Can't hedge worth inverse strategies, leaving the client in an environment where they only make money in an up market. The list goes on and on. Bottom line is protecting retirees from drawdown they aren't emotionally Comfortable with and/or can't financially afford is a curable problem. And it starts with minimizing exposure to volatility. Volatility is a primary suspect in killing retirements. At the of the day, as a former portfolio manager,and I felt I was pretty decent, I realized if I were that good, I sure as he'll wouldn't be working for merrill, ed Jones, or lpl. I'd have my own hedge fund somewhere working as an institutional,actively managed ,tactical fund manager, for the billionaire base. If I wasnt the best, then it was time to join the best.

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