Trends I Don’t Like
Old-timers might recall that I once labeled myself as the Andy Rooney of financial blogging. I’ve sort of revised this article and maintained that particular style.
I’m uncomfortable with a number of issues that affect financial consumers. Here’s some and here’s why.
- Target Date funds being used for the wrong reason. These fund of funds that automatically become less stock and more fixed income as time progresses are supposed to be an easy and sometimes are a default for 401k/403b retirement accounts. What’s wrong you ask? Investors (yes, if you have a 401k plan, you are an investor) in many cases don’t look at the underlying asset allocation (stock to bond ratio) to see how volatile it might be, especially in a down market. I would argue that the ratio is more important than the target date, which can be quite arbitrary.
- More online investment managers using cookie-cutter portfolios. Venture capitalists are funding these efforts left and right. I participated in two of them for research purposes and found them mediocre at best over a five-year period. When the VC boys and girls are throwing money at things, they smell profit. At who’s expense, you might ask? So far, the jury is still out after ten years, and these investment programs may have a place, but I don’t see how they can manage an individual or family investment strategy when they only manage a portion of their asset. Too easy for overlap or concentrations.
- SEC fails to hold brokers to a higher standard. For a while, I thought the consumer was going to reap the benefit of Dodd-Frank insisting that the financial services industry put the customer first, before profit. It’s not working out that way even after attempts by the US Department of Labor and SEC have made half-baked attempts to comply. The mantra is still “buyer beware.” Google: “Favorite Brokerage Company Name” followed by the word “Fines.” Have fun; the best customers seem to get the worst treatment in my experience.
- Online statements being pushed. In 2014, I complained about statements moving online. I’ve gotten used to them as have many others. Still, I find it easier to read the paper versions. How about you?
- Discount brokers selling more stuff to customers. Yes, it’s the good old-fashioned competition gig. “Once we get you in the door, what else can we sell you?” Amazon has this down pat. Now discount brokers are selling money management, financial plans, annuities, and all kinds of insurance. Do-it-yourselfers are under attack with every phone call. How do I know? I have accounts at most of the discount brokers and experience it personally. It’s not all bad, but one-stop shopping has its downsides. You may not be getting the best deal or even need that deal.
There are more trends out there in 2021 that I don’t like, but that’s my take on the 2014 top five. How about you? I’d like to hear your views on these or other non-consumer-friendly trends.