March 19, 2015

What if investors had an independent second opinion?

A Radical Proposal for Investors: What if investors had an independent second opinion? By Daniel Solin (3/18/15). Selectively quoted from his article in US News & World Report. Read his full article at:
“I have a radical proposal for you to consider. Stop making investment decisions for yourself.” Here’s why:
·         You’re not good at it.
·         You’re not prepared for retirement.
·         You follow bad advice.
·         Why you need a new decision model. There is a wealth of evidence indicating that people are better at making decisions for others than they are at making those same decisions for themselves.
For whatever reason, individual investors make awful decisions and are likely to continue doing so.
Daniel Solin’s proposal: In a perfect world, investors would rely exclusively on registered investment advisors (RIAs) who have a fiduciary duty to place the interest of the investor above their own. Unfortunately, we don't live in a perfect world. Investors, it seems, will continue to rely on financial planners who have a lower standard of duty and whose advice is both conflicted and contrary to the weight of academic support.
“To surmount these formidable obstacles, I propose introducing a new disruption to the financial services industry. It involves the creation of advisory firms whose sole purpose is to give a second opinion on the portfolios of their clients. These firms would charge an hourly or project fee. They would be contractually prohibited from converting the consulting arrangement into an advisory one. Their advice would be totally independent. They would offer no other products or services.”

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