Wall Street has Failed us
Wall Street has failed us
Failed with a capital "f": traditional investment management appears to me to be designed primarily to transfer nickels and dimes out of our pockets into Wall Street pockets..
Time waits for no one
Many of my clients are on the verge of retirement. They have accumulated investment assets that must last them for the remainder of their days. I don’t know anyone that can go out and recreate a retirement portfolio.
Through the financial planning process with my clients I have determined I must take a different approach to managing investments for retirement. This does not mean I’m removing risk from investment portfolios, it just means I have to pay closer attention to the following high impact items:
- The long-term negative effect high investment fees will have on a portfolio;
- The impact inflation has on a retiree’s cash flow over their life horizon;
- The increasing danger of volatility, especially as investment time horizons become shorter as we all approach our individual “use by” date.
No one works for free
The investment solutions I’ve employed since starting the firm in 2007 have satisfied #2 and #3 above. #1 has been a much bigger problem for me. Most, if not all investment managers charge fees based upon the amount invested. These fees can range up to 2.5% or even higher. Plus, the costs of the underlying investment vehicles like mutual funds and/or exchange traded funds can add another 1% or so. Too much!
I’ve been looking for a low cost investment manager for at least the last 5 years. I was hopeful that some of the start-up algorithmic or computer driven managers would be a good solution. You may have seen news reports on these type of managers, they’ve become known as robo-advisors, as in the portfolio management is automated by computer driven models, with a robot handling the allocations, trading and reporting.
Several issues crop up with employing a robo money manager: No soul – I make it a point to get to know you and your family and what the money is for. Robots have no soul. Also as evidenced by more than a couple of them being purchased by financial conglomerates, it appears many of them have been established with the intention to be acquired by a larger entity. That’s a reasonable enough strategy, if you are the founder of the robo firm. If you’re a client, I’m not convinced getting taken over by a larger firm is really good for you or your money – think how well your mega bank treats you!
Next: My solution