Stingy Investor Contact - Subscribe - Login
  Home | Articles | Screens | Links | SNW | Rothery Report
 
Stingy News Weekly
The Latest Edition

Get the Stingy News
via email with ...
The Rothery Report

2017
  11: 06 12 20
  10: 01 07 16 23 30
  09: 04 11 17 23
  08: 07 16 20 28
  07: 02 09 16 23 30
  06: 04 11 18 26
  05: 07 14 21 28
  04: 02 09 16 23 30
  03: 05 12 19 26
  02: 05 12 19 26
  01: 02 07 15 22 29
2016
  12: 04 11 18 26
  11: 06 13 20 27
  10: 02 09 16 23 29
  09: 04 11 18 25
  08: 07 14 21 28
  07: 03 10 17 24 31
  06: 05 11 19 26
  05: 01 08 15 22
  04: 03 10 17 24
  03: 06 13 20 27
  02: 07 14 21 28
  01: 03 10 17 24 31
2015
  12: 06 13 20 27
  11: 01 08 15 22 29
  10: 04 10 18 25
  09: 05 13 20 27
  08: 17 23 30
  07: 05 12 19 26 31
  06: 06 14 21 28
  05: 03 09 17 23 31
  04: 04 12 19 26
  03: 01 07 15 22 28
  02: 07 14 21
  01: 04 12 18 25 31
2014
  12: 06 14 21 28
  11: 02 08 16 23 30
  10: 04 11 19 26
  09: 06 14 19 28
  08: 10 16 24 29
  07: 05 12 19 25
  06: 08 15 20 29
  05: 04 11 18 25 30
  04: 06 12 20 27
  03: 02 09 16 23 30
  02: 01 09 16 23
  01: 05 12 18 26
2013
  12: 02 09 16 30
  11: 03 11 17 24
  10: 06 14 20 27
  09: 09 16 23 30
  08: 04 10 25
  07: 07 15 21 28
  06: 03 09 16 23 30
  05: 05 12 19 26
  04: 07 14 21 28
  03: 03 11 17 24 31
  02: 04 10 17 24
  01: 06 13 20 27
2012
  12: 02 09 16 23 30
  11: 04 11 18 25
  10: 07 14 21 28
  09: 02 09 16 23 30
  08: 05 12 19 26
  07: 01 08 15 22 29
  06: 03 10 17 24
  05: 07 13 20 27
  04: 01 08 15 22 29
  03: 04 11 18 25
  02: 05 12 19 26
  01: 01 08 15 22 29
2011
  12: 04 11 18 25
  11: 06 13 20 27
  10: 02 09 16 23 30
  09: 04 11 18 25
  08: 07 14 21 28
  07: 03 10 17 24
  06: 05 12 19 26
  05: 01 08 15 22 29
  04: 04 10 17 24
  03: 06 13 20 27
  02: 06 13 20 27
  01: 02 09 16 23 30
2010
  12: 05 12 19 26
  11: 07 14 21 28
  10: 03 10 17 24 31
  09: 05 12 19 26
  08: 01 08 15 22 29
  07: 04 11 16 25
  06: 06 13 20 27
  05: 02 09 16 23 30
  04: 04 11 18 25
  03: 07 14 21 28
  02: 07 14 21 28
  01: 03 10 17 24 31

Archive

Stingy News Quarterly
2014: Q1 Discontinued
2013: Q1 Q2 Q3 Q4
2012: Q1 Q2 Q3 Q4
2011: Q1 Q2 Q3 Q4
2010: Q1 Q2 Q3 Q4
2009: Q1 Q2 Q3 Q4
2008: Q1 Q2 Q3 Q4
2007: Q1 Q2 Q3 Q4
2006: Q1 Q2 Q3 Q4
2005: Q1 Q2 Q3 Q4
2004: Q1 Q2 Q3 Q4
2003: Q1 Q2 Q3 Q4
2002: Q1 Q2 Q3 Q4
2001: Q1 Q2 Q3 Q4

Dan's Reports
About Dan

Privacy Policy


Should advisors do as they say?
Advisors who buy what they sell

When veteran insurance salespeople tell me stories from the 1970s and 1980s of how they bagged the big life policy sale, they often recount how they demonstrated their commitment to the product by buying it themselves. Is this merely a sales tactic, or should advisors really be expected to buy what they recommend to their clients?

Eating one's own cooking: appeal vs. merit

Anybody in sales is bound to say something like, "I bought this myself" to prove to the prospective buyer that the seller is convinced of the product's benefits. This has natural appeal to investors because they would think that if it's good enough for the advisor, then s/he must truly believe in the product's investment merit.

While its appeal is obvious, is this approach valid? It can be, but there are good reasons to never expect an advisor to be invested in the same types of instruments s/he recommends to clients.

Big picture investing

Recall a recent article I wrote in this space entitled Big Picture Investing. In it, I outlined a methodology for designing portfolios based on the makeup of an individual's net worth and income source(s). If you agree with the approach (which I use personally) then you'd have no choice but to agree that advisors should never "eat their own cooking".

Financial advisors' income and net worth are intimately connected to their business - i.e. client investments. Since their incomes will fluctuate with the fate of the stock market, it's not likely a good idea for them to hold much in stocks personally. Some advisors cater to specialized needs or focus on specialized products, like hedge funds, but most have a pretty standard mix of stocks and bonds.

Hence, an advisor who holds much of what s/he recommends to clients might not be doing such a hot job for him- or her- self. While investing in the very investments recommended to others has intuitive appeal, it's probably not the best way to go for the advisor.

Conflicts of interest

Financial advisors who recommend individual stocks and bonds would actually be in a conflict of interest position to sell stocks to their clients that they already hold themselves. Since there is a limited number of shares or units of stocks and bonds available, having a client buy shares of a stock already held by the advisor may have the appearance of trying to use client money to push up the price.

Regardless of the intent, most advisors don't want to deal with even the perception of such a conflict.

My take

Insurance advisors and salespeople don't have the same types of concerns as those advisors handling investment matters for clients. (Many, of course handle both.) Whether it's a life, disability or other type of insurance policy, it is good to know that the products being recommended are used for advisors' own needs.

However, as investing matters go, I'm a big proponent of the "big picture" or "net worth" approach. Hence, I would expect advisors to manage their investments in a way that makes the most sense for them - i.e. making sure their portfolios look nothing like their clients'.

Investors curious to know an advisor's commitment to their recommended strategies might get a better indication by asking how parents' or siblings' money is invested. That may provide better insight - and certainly should be more consistent with what is recommended for clients.

Dan Hallett, CFA, CFP is the President of Dan Hallett & Associates Inc. in Windsor Ontario. DH&A is registered as Investment Counsel in Ontario and provides independent investment research to financial advisors. He can be reached at dha@danhallett.com
 
About Us | Legal | Contact Us
Disclaimers: Consult with a qualified investment adviser before trading. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, financial advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. More...