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Is your Financial Advisor Trying to Dazzle You?

Is your Financial Advisor Trying to Dazzle You? Is it Helping You?

In our view, the asset management approach at SWA is appropriately simple whether someone is conservative, moderate, or aggressive. We feel far too often that RIAs, CFPs, or a Financial Advisors recommend too many holdings whether stock, bond, mutual funds, ETFs, alternative investments, etc. Why do they do this? I guess the argument that could be made is that it allows for more diversification. That’s possible. However, too many holdings could also lead to a significant overlap of holdings within the entire portfolio. Can a retail financial advisor adequately monitor more than 12 plus holdings in a single account when he or she may have hundreds or even thousands of clients? In my 27 years of experience, I don’t believe so. I think advisors that do this are really fooling themselves and their clients.

I think part of the reason financial advisors recommend 12 plus holdings in an account is to give the appearance that they are really doing something and that somehow that appearance will be viewed as more sophisticated and of more value. It could be argued that it’s the same reason that financial advisors will present prospective clients with a proposed financial plan that might be more than 50 pages long with all kinds of pretty charts, graphs, simulations, and irrelevant analyses. It could be argued that all of this is just designed to dazzle the client or prospective client.

  • Does any of this really help a client though?
  • Does it translate into better investment results?
  • Does it translate into a better risk-adjusted portfolio?
  • Does it really help the client be better prepared for retirement?

Contact our office today if you would like to talk further.