From paying off debts, to fees and middle-to lower-class investors, Investors should consider eight brutally honest points when talking to their investment advisors.Steve Debenport/iStockPhoto / Getty Images
Discussing the year in investing with your adviser will be a lot less fun than it was 12 months ago. Want some briefing notes to prepare for the conversation? To mark Financial Literacy Month 2022, here’s a list of eight things a brutally honest investment adviser would tell you about fees, returns and more:
Some of you clients should stop investing for 12 months to pay off your debts
Investment companies like us make money by applying fees and commissions to the assets in client accounts. With interest rates rising, debt reduction should be the No. 1 financial priority for people who have high household debt levels. See the problem? Recommending debt reduction is a money-loser for us, even if it delivers guaranteed financial benefits to heavily indebted clients and relieves one of the biggest sources of stress in their lives.
We have no answers for years like 2022
You know how we told you that prudent portfolio diversification is the path to long-term investing success? Funny story. Those bonds and bond funds we put in your portfolio for stability dropped like a rock. Sorry about that, chief. Investing means getting punched in the face every now and then, even as you keep progressing toward meeting your long-term financial goals.
Forget investments; the value of what we do is in the planning
Honestly, it’s doubtful anything we recommend will consistently outperform a portfolio of cheap index-tracking exchange-traded funds. Forgive us for pretending otherwise because our business is still very much built on the outdated idea that financial success is about picking the right investments. Where our time is most effectively spent is in finding out your financial goals and then getting you there through a mix of planning and continuous coaching. Try selling that on a billboard.
Don’t worry about us – we’ll be fine
As sure as night follows day, our advice fees get deducted from your account on schedule. The investment company always gets paid – now that’s a rule you can count on.
Middle class and lower-income people are flotsam to us
We may tolerate clients with lower five-figure amounts to invest, but they’re frankly a nuisance because they don’t generate enough fee and commission income. Now, don’t expect us to say so directly and publish minimum account sizes prominently on our website. That would be vulgar. Instead, we rely on signalling like the repeated use of the word “wealth.” Forget advice – the business we’re really in is wealth management. If you don’t have a lot of wealth, try the mutual fund counter at your bank.
Junk investments turn up in our portfolios
Expensive mutual funds? Yeah, we’ve been known to use those in client portfolios. In-house funds that compare poorly with third-party offerings? Blush. Faddish new products to capitalize on trends where the easy money has already been made? Maybe, baby. There’s a show business aspect to the investment advice business. Keep the clients amused.
We’re good at talking at investors, not to them
You say you’re losing money, we say the markets are volatile. You say your bond funds are getting massacred, we say fixed income is facing challenges. Talking in platitudes and jargon helps us gloss over the chaotic aspect of investing and make it seem like we have a handle on things. We don’t – that’s what financial planning is for.
You’re a bit of a slacker, yourself
I, your hard-working adviser, lay out a financial plan for you after many hours of work, and you file it with the slides from your 1975 vacation to the Catskills. I tell you it’s a good time to invest because stocks are down, and you say you’ll wait for the market to hit bottom. I ask that you stay in touch about events in your life and you neglect to mention you’re divorcing, you tapped your retirement savings to give your teenage kid a home down payment and your boss has been avoiding you for months. You’re supposed to be my co-pilot in managing your finances, not a passenger.
Brutally honest banking
Check out last year’s list of six things a brutally honest banker would tell you about mortgages, home equity lines of credit and market-linked guaranteed investment certificates.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
