When in Singapore...

I could hear the exasperation in his voice.

“Dad, Dad, Dad…”

“Danny, are you ok?”

Though he sounded like he was in the next room, my 19-year-old son Danny was nearly 10,000 miles away on a school trip to the far east.

His current whereabouts were Singapore and something seemed to be amiss.

“I can’t find my hotel and my phone is about to die!”

The fact that it was 2 in the morning (Singapore time) and he was on the streets alone in a faraway land - could wait. For now, he needed help finding his hotel.

Though not a partier, Danny had played the game long enough and was done for the evening. I later learned the club was just a few blocks away

Danny, before he got lost in Singapore

and he got turned around on his way back. His GPS led him to the rear, rather than the front of the hotel. Thankfully, he was in his room just a few minutes later. He went to sleep while I tried to regain a normal breathing pattern!

Then it occurred to me…


I’ve never been to Singapore. Not even close. (Because I’m so tall, it’s just too uncomfortable for me to sit in a plane that long…kidding.) But really, I’ve haven’t left the country for 25 years.

Even his friends, sitting in a bar two blocks away, half in the bag, would have been of more assistance than me.

It got me thinking – When we need help, why do we ask the wrong person?

I see it all the time in my line of work. When it comes to planning for retirement, despite the enormity (and importance) of the task, why do so many ask the wrong people for guidance.

The neighbor, somebody at work, a guy who knows nothing about taxes – even your UBER driver. Or a parent…

Why not ask someone licensed, educated and experienced in the art of retirement planning.

Because it costs money. (More on that later!)

[Before we go on, let’s introduce the elephant in the room. I am a dually-licensed retirement advisor. I make money helping people prepare for the race of their lives. (Getting to retirement with some cash in the bank!) I believe with all my heart that people need help so I provide it. I am financially compensated in one way or another for my help. (If you’ve seen me, you know I don’t do this for my looks!)]

So, I’m incentivized to prepare plans but let’s forget about me for a moment. What does Vanguard say about this?

As you’re aware, The Vanguard Group is an American investment management company with over $4 trillion in assets under management. It is the largest provider of mutual funds and the second-largest provider of exchange-traded funds (ETFs) in the world. Vanguard’s founder and former chairman John Bogle is credited with the creation of the first index fund available to individual investors and has been a proponent of and a major enabler of low-cost investing by individuals.

Vanguard mission is to help people manage their investments in the most cost-efficient way possible. Given that mission, it might seem odd that they would commission a study analyzing and extolling the virtues of professional help for investors. But they did so let’s take a peek.

What is the value proposition that an advisor offers to his or her potential clients? And if there is such a value proposition is it true? Do clients receive the value suggested by the marketing proposition?

In Vanguard’s terms, a good advisor is worth up to an extra 3% in annual return. Now, Vanguard is quick to repeat and emphasize that quantifying the value of particular services is difficult and varies from client to client. But still – it’s compelling.

As you can see from Figure 1, some components stand out over others; chief among them - behavioral coaching.

According to Vanguard:

“Because investing evokes emotion, advisors need to help their clients maintain a long-term perspective and a disciplined approach- the amount of potential value an advisor can add here is large. Most investors are aware of these time-tested principles, but the hard part of investing is sticking to them in the best and worst of times-that is where you, as a behavioral coach to your clients, can earn your fees and then some. Abandoning a planned investment strategy can be costly, and research has shown that some of the most significant derailers are behavioral: the allure of market-timing and the temptation to chase performance.”

These are the tendencies I see in my practice.

Morningstar has also studied this phenomenon.

Their studies show that investors generally do more poorly (achieve lower returns) from their funds than the funds actually perform. Said another way, investors don’t do as well at investing as they think. One might suggest that the shortfall is based on irrational investor behavior - selling the fund when it is going down and buying it when it is going up. Morningstar concludes that cash flows from investors tend to lag fund returns; in other words, investors "chase" performance in both directions.

www.seekingalpha.com puts it quite nicely:

“No matter how proficient they may be in their careers and professions, many people facing retirement subjects or investment questions are simply not equipped to deal with them. When it comes to personal finance, they don't have confidence in their ability to deal with investment options. They don't have the requisite understanding of what's available, how much money they need, how to plan things out, or how to choose. They are emotional about the whole subject.”

As I tell anybody who will listen, you’re going to pay at least one point (1%) no matter what you do. The question is what are you going to get for it?

Please understand, we are at a critical juncture for anybody retiring within the next five to 10 years. As this bull market has run for almost 9 years, lofty valuations suggest that there is currently substantially more risk than reward for the foreseeable future. Sure, THIS TIME COULD BE DIFFERENT but it won't be. Never is. It’s not about timing the market. That doesn’t work. It’s about protecting principal, when such principal needs to be protected.

Much like you might solicit a second opinion on where to vacation next year, get some help from a dually licensed investment advisor. Don't ask someone you work with! You might find that your plans are A-OK! From time to time I review someone’s current situation and tell them they’re doing just fine. That I wouldn’t make a single change.

I just wish I could say it more often…

That’s just the way it works!