It is times like these that I am so glad that I quit being a financial advisor. We live in very turbulent times when diversification is less effective in protecting your investment portfolio. Sometimes stock markets all over the world will fall in value at the same time. I really don’t miss the phone calls that I would be getting from clients every time there is a correction. “Sorry, Mr. Client but I can’t make the stock markets go up for you.” (Hand holding isn’t my strongest suit)
One of the most frustrating part of the job was setting up achievable financial plans that were simply ignored. It is maddening when you put a plan together for a client to pay down the mortgage and come back a year later to find out that the client just booked a Caribbean cruise for the whole family. “Sorry, Mr. Client but that wasn’t in the plan.”
Some people just can’t be sold on putting a budget together, having a financial plan and investing their savings. They would rather spend time keeping track of standings and game scores of their favourite sport teams than tracking their monthly expenses.
The main reason for quitting is 80% of mutual fund managers don’t beat their benchmark index. Low cost index funds and exchange traded funds are more readily available today for investors to construct their own investment portfolio. Plus the internet has all kinds of free financial information. Investors have access to the same technology that financial advisors use to deliver services to their clients.
Lastly, asset allocation doesn’t work in this low-interest rate environment. Allocating some money into a fix income product will produce negative returns for clients. Bond mutual funds & bond ETF’s will lose money when you factor in the cost of fees, taxes and inflation. So basically, the mutual fund company and your advisor will get paid to lose money.
Do you need to pay an advisor $2,000 to $5,000 a year for peace of mind?
- Do you need someone to reassure you during market corrections to stay on course?
- Someone to remind you regarding deadlines (retirement contributions, education plans)?
- To review and help make adjustments to your financial plan?
- To assist in evaluating the financial pros & cons to major life changing decisions?
- To help you understand complex financial investments?
- Do you lack the discipline to do it yourself or just don’t have the time?
In my humble opinion, over the long-term, paying for peace of mind can be very expensive. No one will care more about your money than you. I recommend paying for legal advice for wills & estate planning or tax advice from an accountant. However, buyer beware, just because an advisor has passed the required number of courses doesn’t make them a good advisor.
Disclaimer: There are some very good advisors that earn their fees but I have also encountered too many that have lost clients’ money.
Smart Money 
Thank you for your insightful article. A lot of this seems rather credible given my incredibly limited experience…What licensing did you obtain? What type of careers do ex-advisors typically pursue and what do you currently do? From your experience how does one effectively market their previous experience as an advisor into a new role? Your input and expertise is greatly appreciated, thank you.
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Hi Andy,
I took the Canadian Securities Course, Professional Financial Planning Course and the Officers’ Partners’ and Directors’ Course. I was a fee based advisor. I used to get a trailer fee from selling mutual fund products to my clients. I know some advisors have taken courses so that they can sell insurance and courses so that they can act as a mortgage broker. Some have become salaried employees at banks as financial planners.
Since I no longer work as an advisor, all my licences have expired. Read my “About” page for more information about my history
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Great article. Thank you for sharing. I am of the growing opinion that IFAs are becoming irrelevant. I admit to having a jaundiced view. I got badly burned by an IFA called Michael Fleming who is currently working with Trafalgar International and FSN. He said one thing but the documents I stupidly signed said another. It was a moderate portfolio but the charges were so high that that they eroded the capital e.g. fees and charges in the first 5 years amounted to 22.35%. When quizzed he blamed the markets. I had to find out the horror show for myself. I asked him, “How do you sleep at night?” he laughed and said, “Well you signed it.” It was a mistake that costs me hundreds of thousands of pounds. I hope people reading this won’t make the same mistake.
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