It’s always interesting when you see patterns appearing online, only to see similar patterns begin popping up in real life. Recently I’ve noticed a few interesting posts across finance forums where someone has sought feedback on a portfolio. It’s not their own. It’s one they’ve built for an older relative, or they’ve seen a statement for the advised portfolio of an older relative. They’ve then gone online to seek feedback on its construction, if they built it themselves, or the construction and the fees, if advised.
In all of the cases it was clear the people knew just enough to be dangerous. Maybe they’d bought some ETFs, knew a little about fees. This was enough to convince them they could stick their beak into the older relative’s affairs. Although it was clear, they didn’t know enough to act independently. They were sourcing the wisdom of the crowd before they took their next step. Lacking the confidence and knowledge to truly do it themselves, they were hoping to solidify their arguments before taking it back to “Beryl”. Because quite often that’s what it is, a younger male relative looking to show the family how much they know and potentially save an old duck a few thousand bucks a year.
I’ve been told of similar stories cropping up in advice meetings. In one case a younger party has accompanied several people to a discovery meeting for a prospective older client. This person wasn’t even an actual relative (only by marriage), effectively they were nine tenths of no one, but were the loudest person in the meeting and had some strong opinions on what should be happening with a potential portfolio. The ideas might have been appropriate for a 35 year old, but not someone in their late 70’s. The adviser in question had no interest in dealing with such a gong show.
When it comes to financial advice, there are two simple questions everyone needs to answer:
Can I/do I want to do this?
If no, am I happy to pay someone?
On the first one, if you can’t do it, then you move to the second question.
On the second one, brace yourself: services cost money and time costs money.
Fees are always going to be a touchy subject around financial advice because of the legacy of terrible behaviour from some advice groups where clients were seen as cows to be perpetually milked. In the eyes of some, that’s what a financial adviser is and will always be: someone to milk you dry. With that established, the belief becomes there is nothing an adviser can do for anyone that they can’t do themselves, which brings us to the second point.
As investing has become more accessible, more people have an opinion on what constitutes portfolio construction. A lot of people know what an ETF is, so any fool should be able to build a portfolio for under 20 bps and that’s all you need? Right?
“I know a bit about vanguard, let me save Granny a few bucks.”
You can see this becoming a larger issue in years to come.
In the case of the advised portfolio, the selling point will be the elimination of the advice fee and pairing back the fund fees to the cheapest index options available. Maybe not the worst idea, if the person being helped is genuinely into finance and will be taking the reins, but they won’t. In all of these situations we’re talking about an elderly female who has no idea, no interest, and just wants to ensure their portfolio does its job: which is ensuring her outgoings are taken care of until that day comes. That could be next year or in two decade’s time.
The thing is with the know-all, usually a younger male relative or a male who has married into the family, they’re a danger to the client. It’s an older person needing advice or someone to manage their affairs. They’re at risk of not getting the advice or help they need, or being let go by the adviser because the adviser won’t manage by the second guessing of an associate who thinks they’re being helpful. Saving money for an old lady may seem like a noble thing, but who is managing the portfolio and who is counselling Beryl when she needs it?
The know-all? Unlikely.
DIY investing is always boiled down to fund fees and any cost above that is a drag. A platform is a naughty cost, despite the fact it’s protection and aids with reporting, and any ongoing advice fee is a naughty cost, full stop. The last one really exposes DIY investors who want to scream “don’t use an adviser” because they have no idea what an advice relationship may entail.
For the most part, the advised client doesn’t want to deal with their financials. They just want to pass it off and have someone handle it, but they’re also not robots. They are real people. They pick up the phone and they come to the adviser’s office. They have concerns, they have worries. They may not be financial, but they inevitably bleed into the financial area.
It’s unarguable that fees should be as low as possible, but it’s also unarguable that dealing with people has its costs. It takes time and it’s emotional labour. People ring up. They ask questions. They need to be reassured. They may have weird and wonderful theories that need to be dispelled so they can reach their goals. All these things will intersect with whatever else they are going through in their lives. Health concerns, family troubles, job frustrations. Financial advisers hear it all. And it all has to be documented. Another cost. It has to be documented securely in a CRM, so the process is the same for every client. Another cost. The adviser has to take a wage. These things add up, it’s why there’s an advice fee.
If you always start from the position of “how much is this going to cost?” or “how much can we save?”, then forget about making the call to an adviser in the first place. Any meeting will be a waste of everyone’s time.
It only comes back to those two questions earlier:
Can I/do I want to do this?
If no, am I happy to pay someone?
If you’re the end client, you can easily answer those questions.
If you’re the idiot son in law “helping” on behalf of Beryl, she still has to answer those questions. And if you want to answer for her, you should be committed to be her fee free adviser for the next decade, at least.
This represents general information only. Before making any financial or investment decisions, I suggest you consult a financial adviser to take into account your personal investment objectives, financial situation and individual needs. Anyone looking to build a portfolio should seek financial advice to find out which strategy is right for them, if you are looking for financial advice in Canberra, you should visit the previous link as they can help you identify your goals and put in place a reliable strategy to pursue them.
