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ML might force me to start an RIA

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Feb 25, 2009 3:18 pm

It’s frustrating to encourage integrity and see others who seem to think the best thing for a financial advisor to do is to ignore diversification and sell whatever the client likes, regardless of whether it is appropriate for their risk profile. 


One guy I know only sells people indexed annuities with a 10-year surrender charge.  What bothers me is that he calls himself a financial planner.  How can it always be in the client’s best interest if all you have is one product…one very expensive product.

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Feb 26, 2009 6:04 pm

Have you thought of going independent? A lot of guys from ML are going independent instead of starting their own RIA so that they don’t have the compliance headache. 

Mar 18, 2009 9:02 am

I think independent is a good idea.  Joining an independent firm might be a good idea to start.  I have an RIA (I am an CFP also) where I am recruiting the ML advisors into.  But I also believe that each advisors should have their own RIA.  So one of my criteria is that the advisor should be able to mature into their own RIA in about two years.  And yes I will help you do that.  But you also need to decide if you are serious about this business.  You will probably stuggle for the next year or so.  We can help you grow, but it is really upto you to drink the water.  Send me an email if you are interested.

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Apr 19, 2009 6:44 am

[Quote=NewRep73]If it is speculative stock picking they espouse, and they think they
are great market timers or can pick out the great market timers from
their platforms, then I would suggest John Bogle has written plenty of
books citing the preponderance of evidence in academic studies of
historical returns.  David Swensen provides another
intelligent perspective on the market in regards to this subject area. 
As does everyone’s favorite, Warren Buffett.[/Quote]

Swensen uses active managers pretty much exclusively, except perhaps for his timber holdings.  Warren Buffett is the consumate active manager (you could even say activist) and not beyond making gigantic allocation shifts (he confessed in an NYT op-ed in Octobr '08 that his personal account had been 100 percent t-bills until the post-lehman selloff).   I don’t know what we can learn from Swensen and Buffett about index funds, except that they say the non-professional or casual investor is better served by low-cost index funds than by trying to pick managers.  That’s probably spot on.

If you’re a professional and hold yourself out as such, I feel you have to do some work to earn your keep.  And being an active investor doesn’t mean you invest only in speculative stocks, or market time (though long-cycle timers are laughing all the way to the bank right now).

Rigid asset allocation is, and has always been, a crutch.  If you don’t have an opinion on what is rich and what is cheap, and don’t bother to size positions and put together portfolios, why bother with this profession?  It’s easier to sell stuff…