Market Overview

Many Reasons To Fire Your Investment Advisor

When it comes to managing money, most people seek the help of an investment advisor. 

Most of my friends and family complain that they don't have enough time in the day to balance work, family, fun and life. And to top it all off, most don't understand money and the stock market and don't feel comfortable making decisions about their portfolio. So they use the services of an investment advisor, usually the person from their bank, to manage their portfolio.

Do you really need an Investment Advisor?

The answer is not a simple YES or NO but It requires a full explanation.

Let me give you a little background information about myself. I was a Investment Advisor when I was 19 years old. I am not going to disclose the firm I worked for but the level of market knowledge required to give financial advice is really low. I was the wiz kid at the office and knew more about markets than just about everyone and I can honestly tell you that I didn't have enough knowledge to manage someone's portfolio.

The standard protocol for every Investment Advisor is to have the client fill out a KYC, short form for Know Your Client. This survey will outline your expectations and objectives for your financial plan. The results from the KYC will magically recommend the ideal long term asset allocation for your portfolio.

This is the first problem in the process. After reading the article on asset allocation you will realize that the major flaw in using asset allocation to manage risk is that it doesn't protect your portfolio in times of volatility and market crashes. It's like buying an insurance policy to protect your house then the time your basement floods, the insurance policy doesn't pay out because of a technicality. When you use any method to manage risk, you need to make sure that your risk management technique covers you under all problematic scenarios. 
We can teach you how to apply risk management to protect your portfolio.

Then the Investment Advisor will select an assortment of financial products to match the asset allocation plan. 

If your Investment Advisor recommends Mutual Funds or GICs as the core holdings for your long term portfolio (RUN) then you know you are using the wrong Investment Advisor. Read these articles on Mutual Funds and GICs and you'll realize the problems with both products.

ETFs are flat out a much better diversified financial product than Mutual Funds. So why don't most Investment Advisors sell them to you? It's because ETFs don't pay out trailer fees (a lifetime of ongoing commissions from the mutual fund companies), your Investment Advisor doesn't get a cut of your portfolio if they sell you the cheap, smarter, faster and more efficient ETF products.

Most equity mutual fund portfolios are up since 2009 because the general market has been up since 2009 so most people are happy with their mutual funds. If you had ETFs instead of Mutual Funds (assume they are tracking the same index) then the odds are that the ETF portfolio will be worth more because of the lower fees.

Now it comes time to managing your portfolio.

Does your Investment Advisor ever call you about your portfolio? Most likely not.

Did they warn you before the 2008 market crash or tell you that there was potential for a market crash? They didn't because they believe in the Buy and Hold investment philosophy.

That's the strategy where you buy a diversified portfolio then you hold on to it hoping that it will be worth more in the future. It has mostly worked in the past except during market crashes and isn't that the time when you really need it to work!

Human nature plays a wild card in the equation because we are naturally programmed to buy stocks when they are hot and panic and sell stocks when they hit the bottom. So are you disciplined enough to ride out an entire market crash?

You'll notice that you would've made all your money back by holding through all the volatility but it would've have cost you time and opportunity. 

That's 5 years worth of no growth. 

If you invested $10,000 at the peak in 2007, you went through an emotional roller coaster ride and you'd have roughly $10,000 in 2013. 

If you learned how to make money in all market environments and managed to make 12% per year from 2007 to 2013 then 5 years growth @ 12% is $17,623. That's 76% more money, less volatility, no emotional roller coaster all by learning how to manage risk the way Hedge Funds do it.

What happens if you are Japanese and your stock market has been in a slump for decades. 


Do you still want to be a long term Buy and Hold investor? If you bought the Nikkei 225 Japanese Index anywhere from 1990-2000 then you lost a lot of money and you have been waiting over a decade and still have a long way to get back to even.

We learned that the average Investment Advisor believes in asset allocation as the primary risk management tool and that it doesn't work during market crashes, most sell you obsolete Mutual Funds with high fees and GICs that don't grow, usually don't recommend ETFs because they can't generate advisor fees from them, don't manage your portfolio because the Buy and Hold strategy tells you to leave your portfolio alone, so what do they really do for you? 

If you can find an investment advisor that will educate you so that you are responsible for your own financial well being, then you have the potential for a great partnership. 

What you really want is what the rich guy is doing with their portfolio, they hire a Hedge Fund and let them manage their money. 
Do you think your investment advisor could land a job or even get an interview at a Hedge Fund? That's where the best and smartest professionals work.

We are former Hedge Fund Traders and Analysts and we can teach you how to manage your money so you can potentially make money when the market goes up or down. 

We know that most people are too busy to manage their own money so we offer institutional level services that will do all the stock and ETF selections for you.

If you know anyone who has the typical Investment Advisor, do them a favor and have them read this article at There's no reason for them to pay their Investment Advisor for doing nothing. 

Read more articles on the Articles Page and Trading & Investing Blog.

We welcome all comments on Facebook and LinkedIn.

By Joel Laceda -

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Financial Advisors Markets Personal Finance


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