by Archie M. Richards, Jr.
July 2, 2007

George writes, "Having been a financial advisor for ten years, I focus on comprehensive wealth-management planning for clients, using a team of experts to assist with estate planning, insurance, lending needs, etc. I feel offended when you assume that every financial professional is out just to make commissions. This is a problem for some in the industry, but a lot of us truly care about our clients and go the extra mile to meet their needs. I've learned many new ideas from your columns and understand your indexing and ETF strategies. But do you really believe that everyone has the discipline and knowledge to keep the plan rebalanced and stay the course through bad times?"

You're right, George; not every investor can stay the course. When they can't, I hope they turn to caring people like you.

But stating over and over in my columns that readers should consult with an investment advisor would imply that they can't follow my suggestions without help.

That's not true. Many can.

Investors are buffeted with advertisements implying that success is out of reach without professional help.

I say to readers, "You can do it, kiddo; you can do it!"

For rebalancing, I don't want readers using my spreadsheet to seek help from financial professionals. (The spreadsheet is in the Suggested Portfolio section of archierichards.com.) They should turn to a bookkeeper or computer expert, who's inexpensive and doesn't offer investment advice. My recommendations aren't perfect, but they have rock-bottom costs, they're relatively easy, have relatively low risk, and they provide returns far better than most investors achieve. Any effort to make a good investment program perfect, which an investment adviser might be tempted to do, would probably make it worse, especially after paying his fees.

Few sources present the kind of low-key investment approach I recommend. Investment professional don't teach it, because many of them want action.

Those who give investment advice on TV, the internet, and in the press don't have to be right; they just have to be interesting. They tend to highlight what's hot, implying that investors should jump from one investment to another. That is assuredly not the way to go.

I have a problem with financial planners, even good ones like you: They work hard to find out how much volatility and risk a client is willing to accept and then design an investment program to fit those inclinations.

This puts the cart before the horse. I don't want readers to adjust their investment program to accommodate their inclinations. I want them to adjust their inclinations to accommodate the right investment program.

People don't know what risk they can accept until they try. It's a learning process.

Besides, the double diversity I recommend is only moderately risky. In the long run, it's certain to succeed. People should just assume they're going to be wrong in the short run, get in anyway, and, except for rebalancing, stay in.

Another beef: Financial planners place too much importance on saving taxes. True, people should avoid short-term capital gains and possibly use municipal bonds. But in general, they're better off using double diversity with index funds or ETFs, rebalancing annually, and otherwise letting the taxes fall as they may.

Investors should be especially careful about starting traditional IRAs when they don't have to. Those buggers are treacherous! Down the road, IRAs can easily create difficulties that negate the initial tax advantages.

People with financial complexities will naturally turn to advisers like you. The taxation of executive stock options, for example, is beyond the scope of this column.

But financial caring costs money. People as well-educated and well-trained as you are want to be well paid. Many clients are unwilling to cover that cost with fees alone. They therefore accept high-cost permanent life insurance and investment products such as variable annuities that have high on-going charges and whopping commissions.

Too many people in the investment industry make too much money. All the best to you, George, but I'll continue to buck the trend.