Are financial advisors practicing what they preach?
As you know, the Dow dropped to just above 10,000 in mid-April–well below the early March high of close to 11,000.
When I saw that, the thought quickly crossed my mind: Did the financial advisors and financial company executives practice what they preached? You know–did they do the asset allocation, the periodic rebalancing, the dollar cost averaging, the annual reviews for their own personal accounts? I sure hope so. That should keep them in a safer money zone than those who invest without follow-up or monitoring.
It also would be a great story to tell clients: “Remember when he had that big drop in mid-April of ’05? Well, I employ the same strategy that I am recommending to you, and the result in April was that….” (Hopefully, it was a good result.)
Chances are, though, that at least some experts were caught off guard by the market’s drop. They may have planned to reallocate their funds when the market was surging but somehow never got around to it. And by now, they surely are kicking themselves for the oversight.
This raises 2 key points for financial pros: They need to employ sound money management practices themselves; and they need to own the products (or at least the product classes) they sell.
From my conversations with many people in various financial sectors, neither point is a given.
Consider: At several conferences I’ve attended, speakers have asked the audience: “How many of you own…(the insurance coverage under discussion)?” Amazingly, very few people raise their hands.
That is an alarm bell. Why do so many professionals not say they own the coverage that is the source of their bread and butter?
OK, some non-hand-raisers might just be shy; they own it but don’t tell. Others might be very private about revealing financial positions of any kind. Still, the responses are so consistent from session to session that it’s hard not to think that many industry professionals really do not own what they sell.