When talking to a prospect about my advisor services, I would ask him his philosophy about risk. The conversation would usually go like this:

Prospect: "I don't like losing money."
Me: "What do you mean? Can you be more specific?"
Prospect: "I don't mind giving up a little upside; I just don't want to lose too much on the downside."
Me: "So you are concerned about volatility risk?"
Prospect: "That's it."
Me: "Other than that, are there risks you are concerned about?"
.. (long pause)
Prospect: "Not that I can think of."   More 

At the end of October, the Chinese stock market index was up 70% for the year. One would expect Chinese investors to be making money hand over fist. Not so, the Chinese Securities Investor Protection Agency, the equivalent of SIPC, did a survey of investors in November that garnered 2,791 valid responses. The result was shocking.

Only 35% of investors made money in 2009! Of those who made money, 80% saw a return of less than 50%.   More 

I am exasperated. A client of mine just sent me Harry Dent's latest book, The Great Depression Ahead, with a note. My client was absolutely convinced that the Dow will go down to 3,800, and he wanted me to do something to profit from this inevitability.

I don't blame him. Dent is a brilliant man; he makes compelling arguments based on the demographic of aging baby boomers like my client, with just enough data and charts to make the book look authoritative. Couple that with a daily dose of bleak headlines:

• Unemployment and the budget deficit are soaring.
• The dollar is collapsing, and gold is skyrocketing.
• The U.S. is losing its mojo to China.

No wonder he thinks the market is getting way ahead itself.   More 

MIT economics Prof. James Poterba has conducted very rigorous research on the subject of demographic trends and asset returns. His research examined the relationship between demographic structure and returns on Treasury bills, long-term government bonds, and stocks, using data from the United States, Canada, and the United Kingdom.

From his research, Poterba concluded: "The empirical results suggest very little relationship between population age structure and asset returns."

I bet Poterba wouldn't make a very good financial advisor. After examining mountains of data from three countries, this non-affirmative conclusion is the best he could come up with? We financial advisors usually do a lot better; we can spit a mountain of conclusions from a figment of our imagination.   More 

Who are we? That's the question many financial advisors have been asking themselves. I agree with Carl Richards when he says financial advisors have an identity crisis.  Are we looking in the mirror each morning wondering who we are? Maybe not, but we do have a problem.

Let's Confuse 'Em
There are many so-called "financial advisors" that simply want to sell clients expensive products; and one of the ways to do that is to confuse the customer. Now, financial firms don't actually have an official Customer Confusion Department, but they might as well have one. Case in point: We call ourselves "fee-only" advisors, hoping to differentiate from product pushers on commission; pretty soon, they re-brand themselves as "fee-based" advisors.  How many people can actually tell the difference between a "fee-only" advisor and a "fee-based" one?    More