I was going to start a 97 part series on my investment portfolio today but Outroupistache had a comment on my first post where he suggested writing about investment related areas that still need improvement.
So without further adieu…
Financial Advisors – This is wishful thinking, right up there with world peace, but I wish that the financial advisory field was a regulated profession and not an industry group of commissioned salespeople. This may not be all that relevant to a hard core DIYer but there are a lot of other DIYers who would still like to use a professional for some aspects of their planning. Fee-based planning seems to be the answer although from what I understand it’s very difficult to make a living charging fees when all the other financial advisors are “free”.
Mutual fund costs – According to a recent study by some international academics, we have the highest mutual fund fees in the world. I’m not convinced of the accuracy of their measurements but I don’t doubt their final conclusion. This really is up to the consumer to change. As long as 99% of investors don’t know or care about relative costs then they will never come down. Investors need to shop around a bit for cheaper funds. As well, all the major mutual fund companies will reduce their management fees by up to 0.5% or so and the annual trailer fees paid to the advisor can also be reduced by up to 0.5% as well. You would need a fairly large portfolio (I would guess $300k+) to be able to knock 1% off the management fee but I would suggest that if you have at least $50,000 you should ask about a reduction, if you have more than $100k then demand it. It might only be 0.25% but that still makes a difference. If anyone out there has done this then please let me know the details of your situation.
Education – I recall some economics courses being offered in high school (which I didn’t take) but I don’t remember any personal finance or investing courses. These should be mandatory courses for high school students and should be offered to post-secondary students as well. It seems like most people are afraid to do any investing on their own because they don’t know the first thing about it. If they even had a basic level of understanding of investing and financial planning then they would be far better prepared to deal with financial advisors or to do it themselves.
Any other ideas on investment areas that need improvement?
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