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June 01, 2009 at 04:00 AM
The cover story for April’s The Atlantic was a timely article called “Why I Fired My Broker” in which Jeffrey Goldberg recounts the misgivings of middle- and upper-income Americans contemplating the consequences of their investment advisor relationships. Like so much of the new populist propaganda, it wasn’t pretty. In a video interview about the column, Goldberg describes garden-variety vendors of investment advice as “…these Jiffy Lube kind of places. They’ll take your money. They’ll invest it in the same things that everybody else is being invested in.”
Is that a cruel but fair commentary? It is if advisors keep doing what they have been doing yet (insanely) hope for different results, and good luck securing new clients amidst the new prevailing wisdom.
Last month in this space we posited the problem:
o Stocks are not worth their risk premiums and bonds look downright scary.
o Modern portfolio theory, buy and hold, and traditional asset allocation models have been completely discredited
o Diversification is not easily achieved because in a time of crisis all correlations go to one.
But we also spoke to a solution:
o The vast majority of private wealth in America is the result of participation or investment in private ventures, such as business startups, venture capital, and private equity.
o The high-net-worth investor understands and appreciates the wealth-creating potential of private venture investing (PVI). In fact, in many cases that is how they became wealthy themselves.
Advisors could materially improve their value proposition, their competitiveness, and their clients’ portfolios by developing PVI competency and integrating the asset class into their practices.
Why I Hired My Advisor
