Should You Fire Your Financial Adviser?

I take no credit for the following, but it's worth sharing. This is an article by Brett Arends from last week's Wall Street Journal.

Just about everyone has lost money, no matter who manages their investments. But there's a right way – and a very wrong way – to lose.


When it comes to rogue money managers, crooks like Bernie Madoff get all the publicity. But cowboys, charlatans and clowns are far more common, and do most of the real damage.

There are about 270,000 portfolio managers and investment advisers working in America these days. Tens of millions of Americans have a "finance guy" (or "finance gal") of various types to handle their money. Many are wondering these days if they made a bad mistake. I presume most financial advisers are ethical and competent. But I hear from a lot of readers and I must say I am shocked at the way so many have been advised.

It's not simply that they've lost money. Everbody lost money last year, even Warren Buffett.

How can you tell if you should fire your finance guy? Based on emails I've received from reader, here are 10 things that should tip you off.

He didn't just lose money, he lost money stupidly. Everyone had a bad year. But only a fool was still treating Fannie Mae preferred stock as a "conservative investment" when it was 40 cents on the dollar.

He won't return your calls. No, he can't sit on the phone with each client for an hour a day. But this is your money. If he's totally inaccessible during a crisis, he does not take you seriously.

He's rude. Granted, email has given rise to a global rudeness epidemic. But if your money manager isn't polite to you, it suggests he has poor character and can't handle stress. Both are disqualifications for the job.

He hides behind jargon. Don't be fooled. The best money managers speak, and write, in plain English. Like Warren Buffett, Jeremy Grantham, and John Hussman. Jargon is just an attempt to snow you. What's he hiding? Insecurity.

He has blind faith in an automatic "system" for investing. Bah. No such "system" can ever work. If it did, everyone would adopt it, and who would be left to underperform? Successful investing is an art as well as a science. It's pragmatic. It involves judgment.

He wouldn't change course last year. Prices have rarely changed so much in a year. How can the right things to own now be the same as the right things twelve months ago? They can't.

He passes the buck. It's true the government, and those running the big financial institutions, have made a lot of mistakes that have really damaged the markets. But they didn't invest your money. So how can your losses be all their fault? They can't.

He had your money in an inappropriate portfolio for your age and position. There's a reason a 70-year-old shouldn't have all her money in stocks. Any competent money manager knew those reasons a year ago - not just now. Wisdom after the fact doesn't count.

He whines that "this has never happened before." But that's always true of the future. Tomorrow is always unknown. A wise investment strategy takes that into account.

He tries to bully you. I am constantly amazed at the number of people who give in to bullies, thinking they are confident or strong. They are stupid, nasty, insecure and weak. Your money deserves better.

Write to Brett Arends at brett.arends@wsj.com