Sunday, March 18, 2018

Investing in Our Corporatist Age

Not long ago, a newer government rule stipulated that Financial Advisors had a fiduciary responsibility to be good stewards of their clients' money. In other words, the client had to come first. Simple and logical, but the courts have ruled that the reality can be otherwise:

A divided federal appeals court on Thursday tossed out an Obama-era Labor Department rule that required financial investment advisers to act in the best interest of their clients.

In a 2-1 ruling, the 5th Circuit Court of Appeals said the fiduciary rule bears the hallmarks of “unreasonableness” and constitutes an arbitrary and capricious exercise of administrative power.

The lawsuit stems from a challenge the U.S. Chamber of Commerce and eight other business and financial groups brought against the rule. ...

What does this mean in real life?

It means that "financial advisors" (so-called) can pick your pockets when giving you tips on how to invest. They can charge exorbitant fees. They can steer you to high-priced mutual funds that provide them with a cut of the action. The advisors can, at their option, work in their best interest and against yours. They will no longer have to worry about a regulation that holds them accountable.

So how can you counteract this? It's actually (happily) not difficult. The small, dirty secret is, investing assets for retirement is remarkably simple. You can bone up with a few basic books (or pithy blog posts). You can put your money in diversified, low-cost index funds that will outperform 90% of what financial advisors offer.

Want to do it yourself? Choose your percentages of stocks and bond with a Three-Fund Portfolio.

Want somebody else to do the heavy lifting for you (while charging but a pittance)? There are a variety of different funds from which to choose: Life Strategy Funds, Target-Date retirement Funds, even a Tax-Managed Fund.

The point of the exercise is, the lower your investment costs, the more invested dollars you get to keep. (If you pay an advisor 2% off the top, over a 20-year span -- 20 X 2% -- you give the FA a lot of your assets. So don't do it.)

The moral here? You don't need no stinkin' financial advisor. You can get a long fine and dandy without him (or her).

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