“What I want from you,” said the investor. “Is to do better than the market.”
The Planner turned to the investor and stated, “I can’t do that, but I can put in place a plan to make you happy.”
“I want you to make me rich, not happy.” Replied the investor.
The Peddler stepped in, “We specialise in financial planning supported by investment strategies that achieve market-beating results.”
“How much does it cost?” asked the investor.
“Well with my schooling, my boisterous marketing hype, my pseudo-scientific evidence, my social influencer (a shill) … up to 2% per annum more than the market.”
“Bargain.” Replied the investor.
“After 25 years, that’s 50% of your life savings gone up in smoke.” Cried the Planner.
The Peddler laughed and left town before his customer realised, he had been cheated.
American economist Eugene Fama under his efficient-market hypothesis concluded:
“It is exceedingly difficult, even for a professional investor, to beat the market by trying to predict stock-price movements in the short term. Therefore, it is much better to invest in a broadly composed portfolio of stocks instead of engaging in a futile stock-picking effort.”
Still there’s a big market for futile stock-picking effort, drastically overpriced and falsely advertised. Strangely allowed. Even preferred by enthralled investors, surprising this day and age.
I educate my clients. I help my clients understand how things work. They then avoid miracle elixirs.
A wall between advice and product is a wall between planning and intermediation. If you split a firm like this and allocated revenues to where value is really added, you’d see that a stock-picking business isn’t viable when there’s market integrity.
Be a Planner.
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