inspiring ideas

Inspiring Insights, Invigorating Ideas

inspiring ideas

One of the reasons I read as much as I do is to be inspired by others. There’s nothing I love more than discovering an intriguing new way to frame an old idea, and then sharing what I’ve learned, hoping to inspire others as well.

On the flip side, there’s nothing more demoralizing than falsehoods or opinions being spread as facts. They remind me of a shopping channel infomercial. Watch it long enough, and you may start to believe that you really do need that cubic zirconia bauble. Supplies are limited!

At least if you succumb to buying that dime store trinket, you probably won’t be out more than the cost of a good meal. For investors, heeding false “expertise” can be much more costly. That’s probably why I’m not the only one who gets fed up with financial falsehoods. Here are a couple of my fellow commentators who share my frustration with misguided guidance.

Fee-Only vs. Fee-Based

“Fee-only and fee-based are not the same, and I die little inside when they’re used interchangeably.” – Darla Mercado, Pension Resource Institute, @Darla_Mercado

What is Mercado talking about? It sounds like hair-splitting, doesn’t it? But it is actually well worth your while to know how your financial professional is being compensated for his or her advice. Here are the three most common models:

Commissioned – If your advisor is receiving commissions from third-party sources, suffice it to say he or she is exposed to conflicting incentives to recommend particular products or transactions that may not be in your best interests. In addition, these conflicts and their resulting costs (which silently drag on your returns) often remain undisclosed to you.

Fee-Only – SAGEbroadview is compensated by our clients in a transparent, fee-only arrangement. We chose this model so our clients can clearly see what they’re spending in exchange for what they’re receiving. Also, because it is our only compensation, it further strengthens our ability to offer the impartial, product-neutral advice that our clients deserve.

Fee-Based – A fee-based arrangement warrants further inspection. Fee-based advisors are receiving your fees, plus commissions from others. If you’re considering working with a fee-based advisor, it will be on you to ensure you understand exactly where all of your advisor’s compensation is coming from – and why – lest you expose yourself to the same sorts of conflicts of interest that can arise in a commission-based relationship.

Being “Out” of the Market

“Every time someone says, ‘There is a lot of cash on the sidelines,’ a tiny part of my soul dies. There are no sidelines.” – Clifford R. Asness, AQR Funds, “My Top 10 Peeves

What is Asness talking about?

As good timing would have it, Dimensional Fund Advisors recently released a great (short!) video addressing the perennial question many investors ask whenever the markets are dropping, or even swinging more wildly than usual: “Is Now a Good Time to Be in the Market?


Comments from Hewins Financial’s Martha Post and a chart about 1 minute in are particularly applicable to Asness’ lament: “If you look at some of the best days in the market, they came very, very soon after some of the biggest down days,” says Post. “And if you go to cash, and miss those up days, the [negative] compounding effect on your long-term return is quite big.

The video also serves as an excellent example of the power of inspiring collaboration. It features a number of like-minded advisors on this and related subjects that are so important to an investor’s personal success or failure in markets that, as Vanguard’s John Bogle describes it, are “a giant distraction to the business of investing.”

To find your way as an investor, we hope you will be enlightened as we are by the universe of evidence-based insights available to those who will listen. We also encourage you to be on the look-out for those dark holes of half-truths. Stick around our blog for a while, and you should soon be able to tell the difference.

truth quizSAGE Serendipity: If you cry in space do the tears just stick to your face? Do your fingernails and hair keep growing after you die?  While we’re looking for truths this week, take this fun BuzzFeed Quiz and you’ll be surprised at some of the answers.

Sheri Iannetta Cupo, CFP®, Founding Partner (Retired) & Director
[email protected]

SAGEbroadview Wealth Management is a Fee Only firm offering ongoing financial planning and portfolio management, with tax planning woven carefully throughout our services. We work virtually across the country, with offices in Farmington, CT, Morristown, NJ, and Burlington, MA.