The Future of Financial Adivising

The New York Times published an article on how young people aren't attracted to the financial adviser business:

A Hunt to Find the Next Generation of Financial Advisers

It's a flawed piece that fails to disclose the questionable nature of commission-based financial advisers. What I found interesting, however, was the comments section. Commenters, for the most part, seemed pretty well informed. Many questioned the value of financial advisers and felt they could do better on their own with low-cost index funds. Looks like the Jack Bogle camp is winning. Which might explain why young people aren't attracted to the field. It's a dying business model.

Here are a few of the comments:

I had a brief stint as a financial planner. It was dreadful, 100% sales, 0% advising. Based on the advice provided by the managers, it was an unethical (yet legal) business, so I returned to my previous profession. Since there are plenty of sales opportunities selling products that don't steal from the client, why would young, honest professionals who are adept at sales join the industry? [Daniel, Portland OR]

Financial advisors are not necessarily fiduciaries and do not have their client's best interests at heart. The average middle class investor should put their money in low-fee index funds which they can manage themselves. A few good books checked out from the library are a much less expensive way to learn about investing than paying 1% of your assets under management to an advisor. Also, the "Rich Dad, Poor Dad" guy, Richard Kiyosaki is still giving expensive investment seminars even though he declared bankruptcy in 2012, according to Forbes magazine. Steer clear of those types of advisors and you will be better off. Remember that his book costs, 4.00 (including shipping), if purchased used on Amazon. The seminars with the same information cost hundreds of dollars. [ms muppet, california]

Almost no one has any real need for a professional financial adviser. And if they do, their chances of finding one that will help are pretty slim. If they lack the interest, time and skill to manage their own finances, they also lack the ability to find an appropriate financial adviser to help them.

My understanding is that the average cost of financial fees is about 2% of their customer's wealth every year. That makes it one of the most expensive services around. And there is plenty of evidence that their net financial benefit to their customers is actually negative even before they collect their fees.

In short, the finance industry needs to shrink dramatically. That may be bad for New York city, but it would be good for the rest of the country.[Ross Williams, Grand Rapids, MN]

I don't understand why the next generation will need a financial adviser any more than a travel agent (12% decline in employment over the next 10 years), or the video store clerk (are they extinct yet?)

Given a range of better financial products, especially low-cost index funds and target date funds, as well as a number of excellent online financial tools like retirement calculators and portfolio analyzers, I fail to see why I should give 1% of my market returns to an adviser. The move to fee-based is a good trend, but I suspect Gen Y and the Millennials will be comfortable with an online self-help approach. [Tom Stolz, Detroit]

"Advisors" or "sales force"? Why does the NYT repeat and give credence to the industry propoganda? [Ken, Smith]