MK, I wish. He's got mucho moolah. But that was the funniest thing I've read in a long time. First, a guy who was making $20 million a year giving lousy stock recommendations to folks needs a financial plan? Uh, take the $50 million you should have saved, put it in AAA, 5% munis and collect 2 1/2 mil a year. What about inflation? Invest part of the income in inflation hedges each year. Put a bit in anti-dollar plays. Hit the beach and watch bikinis. End of plan. <G>
Second, the article appeared in Slate and I didn't think anything worthwhile appeared there. Some of his points are correct and I agree with them.
You cannot forecast returns, especially after taxes and inflation. Especially not after REAL inflation.
He is right that these little multi-colored booklets are the crutch of the biz now. My own partner uses them and he spends hours slaving over them for each client. He always asks me to stop laughing during presentations. I love it when they show you how much you will make at each risk level. Give me a freakin' break. Everyone thinks allocation and diversification are the name of the game. They not only reduce risk, they eliminate or reduce returns. Why should you buy an overpriced asset just because your plan has an allocation to it? When you hear sentences like, "we think long term rates are going up 300 basis points, so we only recommend a 30% weighting in domestic bonds," your stomach has to churn. Either you don't believe your prediction, a solid probability, or you can't connect the dots. In either case, the two clauses of that sentence don't make sense when taken together. (Of course, if someone is living on fixed income, they may need a large fixed income allocation even if rates are going up. There are still exceptions to every rule. But, in general, I am against going long something I think is heading south).
Fees: Despite their ugliness, you'd be shocked at how little the advisor makes on this crap. Most are recommending these allocation plans because they think you will do well and they can then offer you higher profit products like insurance as an adjunct.
I believe in creative chaos and sometimes it doesn't work. But, in the long run, I think going one day at a time beats a plan by a country mile. How long is the long run? Until it starts working again. <G> |
