Breaking With Jack Bogle by sensibleinvesting.tv
Eric Nelson is one of the most highly regarded investing bloggers in the US. His firm, Serv? Wealth Management, based in Oklahoma City, takes what it calls an “asset class” approach. Eric has particularly attracted attention in evidence-based investing circles for being critical of Vanguard founder Jack Bogle. But when we caught up with him recently, he was keen to point out that it’s possible to disagree with Bogle and still have the utmost respect for him.
SITV: Eric, thank you for your time. How important is it that people use a financial planner? And how should they go about choosing one?
EN: I think the vast majority of investors should use one, and if they are getting the right kind of help, they will almost certainly be better off net of the additional fees they pay for advice.
In trying to find one, I think there are 4 things they should look for:
(1) BUSINESS: In the US, an investor should ask, Is the firm a Registered Investment Advisor (RIA), are they a fee-only firm (i.e. don’t accept commissions), and do they operate in a fiduciary capacity to always put their client’s best interests first?
(2) ADVICE: Does the planner approach a client’s situation holistically? What I mean by that is, will they give advice on retirement, minimizing taxes, how to insure against risks they can’t avoid and any estate concerns they maybe facing as well as managing a goal-focused investment portfolio? If not, you may be leaving some important stones unturned and I’d suggest you keep looking.
(3) INVESTING: When it comes to investing, does the adviser have a “beat-the-markets” approach or a “get-the-markets-return” approach? This is the classic “active vs. passive” argument and I am of the opinion that you should never take advice from someone who is trying to outguess markets through timing or security selection – even with part of their portfolio. There is no room for these “fence sitters” as my friend Jeff Troutner calls them. If the adviser is an “active manager” you simply cannot afford the risks or all of the costs.
(4) PERSONAL: How does the adviser invest their own money? If they are recommending a passive investment approach to you, but aren’t “eating their own cooking,” this is a red flag that they might not stick to their advice when times get tough. If they are telling you that you need a growth-oriented portfolio (with more stocks than bonds) to sustain a multi-decade retirement of rising prices, but then you find they have 60%, 70% or 80% of their own money in bonds, you might want to understand why they are so risk-averse with their own funds. It can’t just be “do as I say,” it should also be “do as I do”.
SITV: You describe your approach as an “asset class” approach. What do you mean by that? And why do you believe in it?
Full interview here via sensibleinvesting.tv