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Looking for Advice? Know Your Options.


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Matt Furman for Barron’s

Ever since the first pooled investment fund was launched in 1774 in the Netherlands, the march of history has headed resolutely in the direction of what’s good for the individual investor. Competition among mutual funds has made them cheaper, and regulators have made them more transparent and safe. Stock trading is now essentially free; technology has revolutionized execution; and, again, regulators have largely leveled the playing field between big institutions and individual investors by improving corporate disclosures and prohibiting certain trading practices, and in a variety of other ways. The financial advice business has, in its own desultory way, only just begun to follow suit.

777彩票地址We’ve come a long way from the boiler rooms where brokers cold-called strangers to persuade them to buy whatever products they could earn a fat commission on that day—but we have not come far enough. The advice business is still stuck in a regulatory morass that is confusing and unhelpful at best, and can lead to unsavory practices at worst. Whether or not financial advisors are required to put your best interest ahead of their financial gain depends on a variety of factors, including how they’re registered, what firm they work for, and what kind of account you have with them.

777彩票地址As the financial-services industry overall has embraced the low-cost, high-transparency ethos, many investors have brought these expectations to the advice business, seeking out “independent” advisors they expect to have their best interest at heart. And many have been disappointed. As Daren Fonda explains in this week’s cover story, the term “independent”—even the term “advisor”—is arbitrary and certainly does not mean conflict-free. In fact, the way the advice business is changing, there is more potential for problems. His story, “How Independent Is Your Independent Advisor?” is a must-read for anyone who has a financial advisor or is thinking about engaging one.

777彩票地址Product pruning is another way the financial-services industry helps investors while it helps itself. There have been nearly 1,000 exchange-traded funds that have closed in the past 10 years, most due to a lack of investor interest. Cleaning up the product lineup is generally good for investors by removing poor options, but that doesn’t mean it’s problem-free. John Coumarianos digs into why, even if painful in the short term, this practice is generally good for the industry and investors, and Lewis Braham explains what to do if you’re invested in an ETF that’s shutting down.

777彩票地址And don’t miss Leslie P. Norton’s conversation with Richard Thaler, who won a Nobel Prize for his work on why smart people make bad financial decisions.

What investing mistakes have you made, and what have you learned? And how can you ensure that you won’t make the same mistakes again? These are important questions as we head into a new decade of slower growth.

Write to Beverly Goodman at beverly.goodman@barrons.com


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