Losing Your Nest Egg is All Your Fault – so there!

Over the Christmas break I have read several articles about the devastation to retirement funds caused by the credit crisis. In many cases the finger is pointed at the investor for not getting involved enough with their investments.

They seem to imply that it is all your fault your investments are down the tubes. Had you been wiser and made better choices you would not have lost as much money. The wealth management industry charging high fees for offering you expert advice and guidance is conveniently forgotten.

We all know most newspapers cannot and will rarely write objective and critical financial articles that put the blame where it squarely belongs – the wealth managers who are paid to manage your nest egg. This could seriously affect advertising revenue.

So they fill the papers with statements that imply its all your fault because,

  • You must get yourself better informed about your investment options
  • You should investigate the fund you are in and look at the last five years
  • Knowing more about your investments can help you get the most out of your nest egg
  • if you had taken the time to properly select your funds you would not have lost your nest egg

At what point is your wealth manager responsible for ensuring you are kept informed and what are they being paid for if not to offer advice and guidance with your investments? More to the point though they should take action to protect it when necessary – like about 12 months ago, dummy.

Have you read one article that says the wealth management industry as a whole and your financial planner in particular have let you down badly during this market downturn. They are the professionals and their advertisement shout out the fact that they know best and will help ensure we can retire in security and comfort. So what did they do for you as your professional investment adviser?

The lessons of the 2000-2002 Dot Com crash seem not to have been learnt. They have done exactly what they did then to protect nest egg- absolutely nothing except to tell you NOT TO PANIC. Whenever I hear the word panic I then want to PANIC.

It does appear that when things are going great the wealth managers and the newspapers they support with their adverting, are quick to take the credit for a job well done. However in a market crash you are told in article after article you should have chosen our investments more carefully – it’s your own fault – it’s you You YOu YOU!

Didn’t all market sectors go down with a thump, or is there some secret sector in the market we poor investors should have had our money in?

Regardless of how much blame they try to heap on the poor investor, you are paying high fees for your investments to be managed by professionals. Most people have a hard time trying to get their head around investments, asset allocations, diversification at the best of times. It is just ridiculous to insist investors take control of the detailed investment process.

People should take control of their nest egg but at the level where they decide what portion to put at risk in equity funds vs. fixed interest or other asset classes. They should ensure their financial planner knows when they want to be out of an investment that is going bad.

You don’t need to analyse 6,000 funds personally and select 10 or so to give your financial planner that will give you a properly asset allocated and diversified portfolio. That’s the detail the financial planner should provide for their fee, damn it. They should look at the last five years and tell you if it is a good investment or not, not the other way around. That’s not your job – it’s theirs.

You should not mind if your financial planner gets it wrong on some of the investments though. I think it was Hewlett or Packard from HP that said you need to pay for “well-intentioned failure” otherwise no one will take any risks. Properly monitored you should expect your financial planner to take action to exit poor funds and move your money to what his expertise and experience tells him (together with the hundreds of researchers back at his head office) is likely to provide you with better returns.

You should expect them to be aware of the market and what is happening and take precautions when they deem it necessary to protect your nest egg.

Will just one wealth manager stand up and say SORRY, we got it wrong? I’m waiting…. Until then it’s all your fault.

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