What Your Advisor Really Means

Get what you pay for: pay less; increase earnings Recently, I heard a complaint from one of our friends at a Christmas party. He told me he was going to find a new advisor because his account had grown very little in the last 6 years. He told me his advisor only charged 0.19% and still he was not making progress with his account. He wanted to show me his statements so we decided to get together. We met for lunch and he indeed had made only a few dollars during the last 6 years. I told him that he could have earned over 13% during that time with a simple 500 index fund. His account could have doubled from what it was 6 years ago. He looked at me as if I had pulled a gun on him. Since I am retired from the industry, I told him he should ask his new advisor about a balanced fund. My wife and I held half of our money in one that has returned about 6.5% since 2010; 9.8% a year since 1970. My friend George hired a new advisor and he was very impressed with all the advisor's claims and graphs. He did NOT use BrokerCheck. I suggested George ask a simple question: "What is the total cost of all the funds you propose using." George did not ask any questions and yet transferred the whole account. I asked George how he answered the risk/reward attitude question on the application. He said "conservative." George, I said, your advisor has no choice but to put your money in the same investments you just left; earning little. I explained What Your Advisor REALLY Means is that you are saying you don't want to lose money so you will never earn more than a bank account. Like George, you can earn more and pay less with a little risk.