I want to copy a reader’s comments to an article in the FT. The article discusses massive problems with the wealth management industry.
“When my father in law died, my mother in law hired a WM on personal recommendation. She’s progressively moved all of her money under the WM’s wing. She tells me her investments are doing really well, but she can’t tell me how much they’re up and she doesn’t know how much she’s paying in fees (she says she has documents, but she won’t let anyone in the family see them). The WM takes her out to lunch each quarter and tells her she’s looking after her money as if she were her own mother. Recently, she wanted to take some money out to help one of her daughters with a house purchase. The WM told her it was the wrong time and recommended an equity release mortgage. We managed to talk her out of it, but I am convinced that this WM is bleeding the poor old lady dry. She’s of sound body and mind, so there is no way we can intervene unless she allows us. She took no interest in money until her husband died and she is very proud to be able organise her own affairs. My wife and I are not dependent on a future inheritance from her, but it’s painful to watch.”
And another
“I inherited a smallish sum of money back in 2011 when I was 28, however it qualified my to get ‘premium’ treatment from WM, so like I sheep influenced by marketing and money aura I handed it over to Pictet. After 5 years the average generated ROI is 3.67% – not bad some will say. Did I mention it’s GROSS amount? The net ROI is 1,48%, so yeah in the longest bull market they’ve exposed me to all the risk of stock market, but the return part of the equation apparently has been consumed by the institution.
How it works? A puppet, like me back then, goes to see the adviser at a shiny headquarters, everything is top notch there: from reception’s staff, marketing folders, espresso and biscuits, adviser’s slick pitch, so a puppet thinks to himself ‘these people really know how to handle money, I will confine in them’. It’s all BS, the facade is made of shiny objects and savvy sales people, the investment staff are bookish CFA types playing with your money and testing different theories but clueless about bottom-line responsibility. They are clueless about industries they cover, unless industry knowledge is considered their projection sheet… “
Why do investors put up with dealing with these firms?
In these examples, investors could identify a problem. They were lucky. Often, you don’t know you have a problem. If you knew, guess what, you would solve the problem.
The moral. Stay focused on those managing your money and really start asking great questions.