Hacker News new | past | comments | ask | show | jobs | submit login

Their advice isn't necessarily terrible, it's just strongly biased towards them making a buck off you.



It used to be standard for advisors to make money on commission, which led to terrible incentives (read: they are paid to get you into particular investments, which is an incentive to recommend things that make them money even if they are bad for you). This practice is declining, but you still find it at the big banks and brokers. "Fee only" advisors means they only take a fee from you, so they don't have this conflict of interest -- you can find many at Napfa.org .

Even then, though, advisors are biased to recommend things that they can actually do for you, so sometimes they will recommend things that are easier for them ("just use the same portfolio as my other clients") instead of finding what's truly optimal for you.

And that's actually usually okay. The kind of person who never touches their investments and doesn't understand finance is actually better off with an advisor than doing literally nothing -- e.g. sitting in cash, or really dumb investments your aunt recommended -- which is the practically the counterfactual a lot of the time


>e.g. sitting in cash

I read somewhere (but didn't do my own research) Schwab's business model these days, maybe others, is making money off idle customer cash, now that they don't charge trading commissions. They may not want customers to buy anything.

With interest rates up so much, I would guess it is even more lucrative?


With VMRXX giving a YTD compound yield of 5.41% ( https://investor.vanguard.com/investment-products/mutual-fun... ), I've actually been happy to have parked a bunch of cash and not touched it.


It isn't going to compound though, at least that's what long term rates imply.




Guidelines | FAQ | Lists | API | Security | Legal | Apply to YC | Contact

Search: