DOJ Rule on Retirement Accounts

I took issue with this clearly biased piece on the proposed DOJ ruling. There are business interests supporting both sides of the argument and of course politicians are weighing in with little to no understanding of financial markets and the market for financial advice.  

THIS is how Obama can fix 401(k)s

When it comes to understanding the value of financial advice, regardless of what you think it’s worth paying for – within reason, consider this.  In 2007-2008 how many financial advisors aggressively persuaded their clients to market time and go to cash ahead of the financial crisis?  Easy to believe that number approaches 0%?  That’s probably closer to true than not.  However, in 2008-2009 when the markets were in free fall, and in hindsight were bottoming, how many financial advisors were complicit in allowing their client’s fears to allow them to sell at or near the bottom.  I’m willing to believe that the answer here is equally close to zero. 

The value of financial advice, measure purely in dollars is flawed. Furthermore the value of financial advice measured over short term performance and/or market volatility is also flawed.  The single most valuable service a good advisor can give to a client is to build a sound portfolio around your goals, risk tolerance and objectives, and then hand hold you through turbulent times so you don’t derail your own financial outcomes. 

The prospect of low cost, robotic (if even that) advisors taking control of trillions of dollars in retirement savings poses a far greater risk to consumers and financial markets.  

Will you robot call you during the next crisis and help you understand what you own, why you own it, help you navigate hard times without realizing permanent losses?   If it does, let me know as I will put all of my own money in the stock of the company that figures that out. 


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