The weekend is right around the corner. I’ll be in Las Vegas with a group of crazy overworked men from New York most likely riding bikes and reading poetry. I don’t particularly like poetry (or rather, I’m no good at it) so my odds of survival are relatively low. If this is our last interaction I don’t doubt that you’ll find it disappointing.
1 – Fix the Financial Advisers! Here’s a nice piece from Jason Zweig about the state of the financial advisory space. Jason notes that it’s harder in most states to become a hairdresser than it is to become a financial adviser. The honest answer to why this might be is that a lot of financial advisory is very basic stuff. I’ve previously laid out the “only basic financial advice you’ll ever need“. It’s not rocket science. Invest in yourself. Save a lot of money. Buy low fee diversified index funds when you allocate your savings. Contribute to retirement plans. Don’t go to Las Vegas on the weekends, etc. The details are somewhat more complex, but giving basic financial advice isn’t like performing a heart surgery or understanding Tort Law. Heck, cutting someone’s hair might literally be more complex than the advice that 90% of advisers are providing.
That said, I wouldn’t be against a higher hurdle for becoming an adviser. An undergraduate degree in finance or some equivalent prerequisite would be a good start. Advisers deal an opaque industry that isn’t well understood. Even though much of it is very basic it can still be extremely confusing for the average person. A higher hurdle for providing financial advice wouldn’t be a bad thing.
2 – Fix the Factors! Here’s a fantastic piece by Patrick O’Shaugnessy on factor investing. He says:
To achieve what we call factor alpha, we believe that investors should use multiple, unique factors to build a more concentrated portfolio of stocks (as few as 50) with the best possible factor profiles. That means not owning wide swaths of the market.
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