While travelling through the States recently I took the opportunity to read the business section of the local paper. The pieces that I find myself gravitate towards are personal help columns written by financial planners. The Globe has such a piece each Saturday, replete financial advice that often includes a warning not to be too heavily invested in Real Estate. It’s a form of professional self torture to read these pieces, but all the same it is interesting to read opinions that vary from mine. Financial planners it has always occurred to me, are in a constant state of conflict of interest far greater than those encountered by realtors in the course of conducting their daily business. By the very nature of their business, they are advising their clients on how to maintain or increase their wealth. Rarely, are the experts in these columns ever encouraging clients toward an investment vehicle which does not happen to produce an income stream for the financial planner. This particular article was actually pointing out that conflict, using an anecdote that I found revealing as to the financial mindset of both the writer, and I am beginning to gather the average American Joe. ‘What’, he went on to reason, ‘if the best financial advice for his senior clients would be to pay down their mortgage’? His assertion, was that giving that advice would remove funds from his management portfolio, and thus reduce his income, and thus, the conflict of interest. Fair enough, point made. What was not addressed however, was why did a senior citizen still have a mortgage? To me, that seems like the kind of situation one would be able to encounter without the professional help of a financial advisor! Granted, and understood that tax laws in the States encourage borrowing as the interest is deductible. But I could not help but wonder if that mentality also is the seed that contributed to the financial crisis in the first place. Perhaps my conservative roots are showing, but I had always thought that the reason the mortgage on my house was amortized over 25 years, was so that in theory at least, I would not have a mortgage payment when I was old and had no income. For the sake of our long term financial viability, I hope that I am not in the minority. It is for this reason, that I welcome efforts made within the Canadian banking industry to make it more difficult to get a mortgage. Yes, our immediate income may decline, but in the long run protecting us from ourselves may be a good idea.
The financial planning industry is one in which I have always marvelled at for only one reason – they seem to have managed to convince their clients of the benefits of paying a percentage of their net investments on an annual basis for the task of watching those same investments fluctuate with the vagaries of the stock market. We, professional realtors on the other hand, seem to be in constant ‘justify your fee’ mode for a one time service charge when we sell a house. Imagine proposing to your clients that what you intend to offer them, is the opportunity to share in the total value of the equity maintained on their real estate portfolio on an annual basis!
The last three stocks I ever owned, were of companies that no longer exist. While it was painful at the time (close to twenty years ago), it may have been the best thing that ever happened to me. As Mark Twain said, “The cat, having sat upon a hot stove lid, will not sit upon a hot stove lid again. But he won’t sit upon a cold stove lid, either.” – and so it has been with me, and I have never purchased another stock or mutual fund again.
If ever I succumb to the notion of enlisting the help of an expert to manage my retirement, I will have but one requirement – they had better be rich. I can figure out how to be poor on my own.
Thanks for reading,