Lecture 12: Putting Your Financial Plan Together
% %URNHUVDOVRKDYHDQLQFHQWLYHWRHQFRXUDJHDFWLYHLQYHVWPHQWV
EHFDXVHWKH\PRUHRIWHQSD\KLJKHUFRPPLVVLRQV7KHVHVRFDOOHG
broker channel mutual funds consistently underperform direct
FKDQQHOPXWXDOIXQGVZKLFKLVZK\PDQ\¿QDQFLDOHFRQRPLVWV
ZRQGHUZK\VRPDQ\LQYHVWRUVEX\WKHP7KHUHDVRQLVEHFDXVH
they are often packaged with investment advice, which most people
GRQHHG
% 5HJLVWHUHGLQYHVWPHQWDGYLVRUVDUHUHJXODWHGE\WKH6HFXULWLHVDQG
([FKDQJH&RPPLVVLRQDQGDUHOHJDOO\¿GXFLDULHVZKLFKPHDQVWKDW
they are supposed to make recommendations that are in your best
LQWHUHVW,IWKH\GRQ¶W\RXFDQVXHWKHP7KLVFUHDWHVDQLQFHQWLYH
WRPDNHUHFRPPHQGDWLRQVWKDWFDQEHGHIHQGHGLQFRXUW5HJLVWHUHG
investment advisors are generally compensated as a percent of
DVVHWVXQGHUPDQDJHPHQW
% <RX¶UHOLNHO\WRJHWGLIIHUHQWUHFRPPHQGDWLRQVIURPDUHJLVWHUHG
LQYHVWPHQW DGYLVRU WKDQ IURP D EURNHU 5HJLVWHUHG LQYHVWPHQW
advisors are more likely to prefer passive investments, for example,
EHFDXVHWKH\GRQ¶WJHWFRPSHQVDWHGIURPUHFRPPHQGLQJDFWLYH
LQYHVWPHQWV5HJLVWHUHGLQYHVWPHQWDGYLVRUVDOVRWHQGWRGHDOZLWK
ZHDOWKLHUFOLHQWV7KLVOHDYHVPDQ\UHJLVWHUHGLQYHVWPHQWDGYLVRUV
RXWRIUHDFKIRUPDQ\LQYHVWRUV
% %XWWKHUHDUHTXDOL¿HGDGYLVRUVZKRZLOOFKDUJHDQKRXUO\IHHWR
KHOSSXWWRJHWKHUD¿QDQFLDOSODQ$JRRGVRXUFHIRULQIRUPDWLRQIRU
ORFDWLQJIHHRQO\SODQQHUVLVWKH1DWLRQDO$VVRFLDWLRQRI3HUVRQDO
)LQDQFLDO$GYLVRUV7KHUHLVDOVRDQLQFUHDVLQJQXPEHURIRQOLQH
¿QDQFLDOSODQQHUVZKRZLOOFKDUJHDPRQWKO\IHHRUD¿[HGIHHWR
FUHDWHD¿QDQFLDOSODQ
% Finally, there is no consistent training among professionals within
WKH ¿QDQFLDO SODQQLQJ LQGXVWU\ 7KH PRVW ULJRURXV FHUWL¿FDWLRQ
RIFRPSUHKHQVLYH¿QDQFLDONQRZOHGJHLVWKH&HUWL¿HG)LQDQFLDO
3ODQQHU &)3 GHVLJQDWLRQ &)3V KDYH WR SDVV D KRXU H[DP
ZLWKDERXWDSHUFHQWSDVVUDWHRQDUDQJHRI¿QDQFLDOSODQQLQJ
WRSLFV²QRWMXVWLQYHVWPHQWV7KH\DOVRKDYHWRIXO¿OOFRQWLQXLQJ