Chapter 6 It appears on the surface that two major causes of inferior investment performance among individuals are poorly timed decisions and high costs. While there is ample evidence that people lower their returns by market timing, style shifting, and paying high expenses, these mistakes are also symptoms of a much deeper problem. | Chapter 61 Advice About Investment Advice The cheapest commodity in the world is investment advice from people not qualified to give it. Louis Engel It appears on the surface that two major causes of inferior investment performance among individuals are poorly timed decisions and high costs. While there is ample evidence that people lower their returns by market timing style shifting and paying high expenses these mistakes are also symptoms of a much deeper problem. The main problem plaguing poor returns is that people are not getting good investment advice. Issues concerning the quality of advice have many facets but the main issue stems from the fact that many of those giving advice have ulterior motives. They are trying to better themselves in one way or another. Consider this recent memo from the management at American Express Financial Advisors to its sales representatives about increasing the fees they are charged for selling certain outside mutual funds our goal is to balance the needs of the clients advisors employees and stockholders. Basically the memo was 82 Copyirght 2003 by The McGraw-Hill Companies Inc. Click Here for Terms of Use. Advice About Investment Advice trying to push brokers into selling more in-house mutual funds with higher fees thereby producing higher profits for the firm. The fact that the outside mutual funds performed better was irrelevant. Brokerage firms are not in business to make money for you but to make money from you any way they can. Selling Lies To be successful an advisor service must tell people what they want to hear not necessarily what is the truth. Nicolas Darvas Here is the hard truth. Wall Street firms are paid a lot of money to create and distribute many questionable investments that ultimately end up in the hands of individual investors. Most of the time they get away with acts that border on fraud but sometimes the losses are so large that politicians demand investigations. In 2002 alone two major Wall Street .
