Some market decisions you can't fob off to your adviser
MOST financial professionals accept that implicit in their fee is compensation for taking the responsibility for the poor performance of a client's investments without taking the credit for good performance.
MOST financial professionals accept that implicit in their fee is compensation for taking the responsibility for the poor performance of a client's investments without taking the credit for good performance.It's a bit of a joke of course how can a financial planner in Bendigo possibly be responsible for the performance of global markets, but still they take the blame and they do so to protect a client from taking the blame themselves, while generously bequeathing them the credit when it goes right.It is an extremely important service which is highly valued by the client. It is like an insurance policy, a free option on looking clever, or at least not stupid, whenever you have to explain your investment performance to your spouse, dependents or dinner party guests.Far better that your fund manager is a muppet, your stockbroker an idiot or your financial planner a crook, than you take responsibility for anything. The client is always right after all.But, games aside, the truth is that there are certain decisions in finance for which the client is responsible. So, rather than hide behind your adviser, it would be far better if you took those decisions up front. They include:THE DECISION TO INVEST IN THE FIRST PLACE It's a bit like this. If you wander on to a car lot looking at cars, the assumption is that you want to buy a car.So, when you turn up in the offices of a financial professional there is an assumption that you want to buy something and, as most financial professionals only get paid when you do buy something, their job is to arrange for you to buy something. They are both salesman and agent. But it is your responsibility. If you wander into the yard and then get sold a car, what did you expect?LEVERAGE Leverage to us is a product. We get a trail on it and, even if we don't, the more money you have the better it is for our fees and commissions.It is in our interests to sell it to you and we would be foolish not to, not to present it as "normal" even when it's not. But it's not normal and it's not necessarily good for you. It is just an accelerant. If you lose you will lose more. If you win you will win more. And the undeniable reality is that it is only suitable in reliable bull markets. And, by the way, if you own shares outside of super and have a mortgage, you're leveraged. Being leveraged or not, it is your responsibility.SELLING One of the hardest lessons from the global financial crisis was that nobody ever tells you to sell, because our job is to get you in, not let you out. The decision to sell is yours and, even when you decide to do it, you will have to be assertive because the likelihood is that we will resist you and we have a well developed bag of tricks to stop you. If you want to get out of the market you have to decide to do so. The decision to sell is your responsibility.HAPPINESS Happiness is expectations met and the route to unhappiness is to have unrealistic expectations about what your investments are likely to achieve.The main problem there comes from not understanding your benchmarks. In managed funds, it's the average return on all the invested asset classes less fees and because of fees you have to expect to underperform. Because there are so many unrealistic expectations in this industry, often led on admittedly by unrealistic sales pitches, the number of people that get pleasantly surprised is tiny and the number of people disappointed is big. Your happiness is a function of realistic expectations. It is your responsibility to be happy.The bottom line is the unfortunate fact of life that you cannot avoid responsibility for your own financial affairs. You have to be involved because, as any financial professional will tell you, "if you don't care, no one will".Marcus Padley is a stockbroker with Patersons Securities and the author of stockmarket newsletter Marcus Today. For a free trial, go to marcustoday.com.auHis views do not necessarily reflect the views of Patersons.