A Cautionary Tale for People with Financial Advisors, so That They Trust Their Instincts and Don’t Become Victims of Wealth Management Malpractice

When You Hire an Advisor, Don’t Check Your Vigilance at the Door

I used to run a couple billion.

Now that I’m retired I help people steward their wealth. I sometimes analyze their portfolios and teach them how to evaluate their investment advisors. Listen, there is some seriously funky stuff being done to your money.

I am no longer shocked by what I find in portfolios.

My friend had me review her IRA. She funded it with $5,000 on March 11, 2020, about halfway down the market’s COVID-induced swan dive. Her advisors did not invest it until July 29th. It sat in cash for 4 ½ months. She kept checking her account, wondering why it was still in cash while she was being charged a 1% management fee and earning $0.04 on her money each month.

I would have been fired on the spot for doing that as an institutional investor.

I can understand waiting a few days when the market is a falling knife or dollar-cost averaging (investing gradually). But do nothing for 4 ½ months?! Had her money been put to work right away in the S&P 500 it would have been up 19% by July 29th. That’s a $950 mistake, never mind the lost compounding on that phantom return.

My friend assumed her advisors knew better.

Her instincts told her something was off, but she didn’t question them. If cash was part of a cunning investment plan, no one told her. There was no reason to hold cash that long: 1) This was retirement money 2) she is a young woman 3) this was a small part of her finances. It was a costly mistake.

Never abdicate responsibility for your money, and trust your instincts.

The advisors told her investing her IRA was too complicated to do on her own.

There were 13 ETFs in that portfolio. WTAF?

Diversification is critical in an investment portfolio, but this looks like deworsification.