Monday, July 13, 2009

Financial Advisors - How Dumb Are They?

There was an shocking story on gold recently in the Personal Journal section of the Wall Street Journal. It was shocking in that I did not know that the Wall Street Journal was even aware of gold's existence.

To me, there was one outstanding feature of the story. The highlight of the story was when the author of the article turned to the so-called experts on personal wealth management - financial advisors. In my view, it really showed how out of touch these people are with financial reality and painted today's financial advisors as the dumbest guys in the room.

Remember these people are the same people who have completely missed the trade of the decade - sell stocks and buy gold. They have been wrong about gold for almost 10 years now and have been steadily losing money for their clients while continuing to "earn" fees for their efforts.

Why don't most financial advisrors recommend gold as a component for clients' portfolios? Simple - if they tell clients to go out and buy gold coins and stick them in a safe deposit box, they can't make any money!

Remember that old saying about liars figure? A financial advisor was quoted in the article as stating that over the past four decades, the annualized return for gold was only 8.4% versus a return of 9.1% for the S&P 500.

Huh? The figures I look at over the past 40 years show that the S&P 500 index has gained only about 7.5% annually. Meanwhile gold over the past 40 years has climbed from $40 per ounce to about $920 per ounce, an annual gain in excess of 11%.

Never let the truth get in the way of a great sales pitch! If only financial advisors could figure out a way to make money regularly from recommending gold.....

1 comment:

  1. They can - by recommending GLD. Then again, I let my Series 7 and 66 lapse as I could not stomach selling VUL's to hapless "clients".

    Yes, WikInvest and my site have an agreement too.