I would like to correct this on my experiences in the events leading to the GFC and the aftermaths.
While I'm not defending those financial planners, I think it is inappropriate to lay the blame on them for failing to predict the GFC and did not advise their clients to cash out just before the market crash. This is despite to the number of "warnings" out there.
The signs may have been obvious to those who have been "listening" to the right sources, but certainly not if most financial planners, or even the general public, have been listening to the mainstream news.
So you don't think financial planners/advisers should have been actively following all the financial news? I can't believe you'd seriously suggest that.
Fair enough that most average investors would not be seriously following daily events (though I find even that strange if they had money involved), but I'd have thought it a fundamental part of the job description of anyone involved in advising clients re financial matters that they be completely up with whatever is happening.
The potential crash was actively made understated prior to the events. This is clearly evident, the subprime crash would not affect global markets, blah blah blah, etc. Mainstream news were largely biased in being extremely optimistic about the future (and still is!) and to most people, they would have never foresee the crash with any certainty.
That's quite true, and constitutes my original objection to the published views of financial advisers and economists quoted in the mainstream media.
As far as I can recall, without exception they assured people it would all be just hunky dory.
Exceptions of course, if their financial advisors were the only few economists/bloggers, who predicted the crisis and actually did GAVE FIRM ADVISE to get out on a particular date or else.
However, very few financial planners would have the ability to take heed to those advises (let along actually FIND THEM) and then actually advise their clients to take actions.
Well, if that's the case, then imo they shouldn't be in the job of advising others.
My opinion is that it's quite unfair to blame them for their incompetence with the amount of misinformation and massive amount of media biases out there.
I disagree.
This along with all other corporate requirement of selling approved product lists, maintaining sales target, etc, etc, would have certainly hinder them from making such good advises.
(Try 'advice' )
Now we are probably getting closer to the reality of the situation at last.
I don't know the current, um, 'guidelines' under which most financial advisers are required to work by their head offices, but I can pretty well guess.
Let's just say your comment here pretty much reinforces my original suggestion that motivation of some FA's is not necessarily firstly the financial wellbeing of all their clients.
(With sincere apologies to those to whom this absolutely does not apply.)
At the end, it may have been obvious to some of us, but it certainly wasn't to a lot of people including ultra rich investors / high profile economists. Some of them never saw it coming. How do you expect a common financial adviser to do the same?
I've previously suggested that economists - many of whom were fulsome in their pronouncements that there wasn't going to be much of a problem - are not necessarily qualified to comment advisedly on share markets. That is not their brief. Ditto accountants, who should mainly stick to advising their clients about tax and related matters.
I've already answered your question "how do you expect a common financial adviser to do the same?". If many of us ordinary retail investors, simply by following the daily financial news, were able to think it pretty damn likely that things were going to be very unpleasant indeed, I simply can't believe that someone whose job it is to be aware of the financial climate in detail and advise their clients accordingly, should not be able to do the same.
As I said previously, no one could have, with absolutely certainly, predicted the timing of the crash, or the recovery, and the magnitude of it.
No, that's quite right. No one can pick what a market will do in a day's time, let alone in the next couple of years. But you can make a reasonable prediction, erring on the side of protecting capital if approaching retirement, if you simply objectively consider how global markets were falling along with all the economic bad news which continued to come every day.
It's certainly not the role of a financial adviser to make such predictions.
I disagree.
They certainly wouldn't do it either even if they have been sourcing from the right information. Fear of litigations if their predictions were not correct would have deter more advisers from making such predictions.
OK, that might be right. I have no idea. But why wouldn't they be equally at risk of litigation for failing to appropriately advise, as has clearly been the case in many instances?
That I agree, and my understanding of what financial advisers do is that they generally recommend asset allocation for retirees to be in the income area and less in capital speculations. Preservation of capital and focus on income.
But, for heaven's sake, that is my point. They failed to look to preservation of capital. You are contradicting yourself.
Of course, human greed bypass that. The clients could easily override their advisers' decisions,
OK, fine, but then the onus would have been on the client, and the adviser would have done his/her job.
and corporate need to sell financial products (growth funds) also affects it.
Ah, once again, we actually get to the reality of what is the motivation.
Thank you indeed for that final observation.