The emerging competition

Be sure to read the comments to the Robert Franks article that JLM links to below. There is a tremendous amount of ill will toward "financial advisors" who don't really do much advising at all, who spout the company line and are salesmen. The emerging competition is "do it yourself," even for those who are managing a couple million dollars.

That will prove tough competition, because many people think that they can do at least as well as the market, and no one can promise to outperform the market.

Still, I think it's a dangerous approach for many. Consider this story from today's Journal, Loyalty Pays a Bitter Dividend, about a widow whose husband had a large holding of a local bank stock. Over the years, through a series of acquisitions, that morphed into a sizeable number of Wachovia shares. The Wachovia dividends provided this widow with 1/3 of her income. That's gone now.

Someone should have told her to diversify--that's the first piece of advice she would have had from any financial advisor. Actually, someone did, but she wasn't persuaded. Wachovia's dividend was too hard to replace, not to mention the significant tax cost of diversification. Her mistakes are her own, and she isn't going to be bailed out.

Stories like that help make the case that professional investment supervision does add value to a portfolio, and should help trust departments make their case.