“no client of a financial planner or investment adviser should be doing as poorly as the markets.”
I hope that quote was taken out of context. But Kiplinger’s published that quote and attributed it to Bob Veres of Inside Information newsletter. While it would be great if financial advisers actually provides such valuable insight that they should be held accountable if their advice ever under performed the market, in reality that is total and utter bullshit.
Now, don’t get me wrong. I think most financial advisers are worthless at best. But if you have an adviser that is leading you down a path that is better than the path you would have chosen on your own, then they are providing a valuable service.
If your plan, that you developed with strong input from your adviser, that you followed, was to mitigate market risk, by taking lower return for more security and your portfolio dropped faster than the market in general, you should fire your adviser.
But, if your adviser and you decided that you were young, and you had many years of growth ahead of you and you were ready and willing to suffer increased risk for higher return? Your portfolio should, quite acceptably, have dropped faster than the market.
There are three types of long term individual investors in my eyes (highly generalized). There are the people under 40, who are looking from strong returns and have the years to deal with increase market risk that goes along with them. There is the 40 to 60 crowd, who is starting to shy away from market risk, and are selling off their more risky investments and reinvesting the money in less risky assets. Finally there are the 60 and up crowd, who really can’t tolerate risk and bang their head against the wall trying to figure out how to invest their large portfolio, risk free, and still keep up with inflation.
All three of these groups, sadly, are still exposed to under performing the markets. They all still have needs of growth, and even the groups who want to move to riskless investments still have to deal with tax consequences finding those “riskless” investments.
Advisers should be fired because they typically impede financial growth, not because they underperformed the shittiest market since the Great Depression. If you are saving because you meet with someone twice a year, but otherwise would spend that money, than that adviser is worth the 1% fee he charges. He is the difference between having savings and not having savings. Preparing for retirement or living off of social security checks when you can no longer work. He has value, even if his plan underperformed the market in 2008.