Sales pitch or sound advice – Part Two

In my previous blog post, I talked about the basic differences between brokers and Registered Investment Advisor (RIAs) including how they are governed, their compensation arrangements and their legal obligations to clients.  In this article, I’ll explain the affect that suitability and fiduciary standards can have on an investor’s financial security.

Objective industry experts have long argued that while in theory both suitability and fiduciary standards limit self-serving behavior, in practice the suitability standard provides such wide latitude for brokers’ recommendations that it is meaningless in protecting the consumer. Read more

Sales pitch or sound advice – Part One

Individuals trying to plan, save and invest for their futures are increasingly seeking out professional advice. Unfortunately, many are forced to search through over 200 financial services designations with wide-ranging educational standards, legal obligations to clients, and compensation arrangements just to find the right help.

A 2008 landmark study conducted by the RAND Corporation concluded that although retail investors felt they understood the difference in services offered by various financial industry representatives, in fact, most had no idea. Angela Hung, the study’s lead author, a RAND economist with a Ph.D. from Caltech, remarked that even she found it difficult to disentangle the titles, services and business relationships of most of the industry participants. It is no surprise, then, that the typical consumer finds it nearly impossible. Read more

What is life cycle finance?

Life cycle theory is one of the more exciting and useful areas of research in personal finance. In broad terms, it represents the body of economic theory and knowledge that examines how individuals can make wiser and more beneficial decisions about spending, saving, investing and insuring over their lifetimes. There are several concepts underlying life cycle theory. We’ll discuss two of them in this article. Read more