Colbath: Advice on advice


I have spent the past 23 years working in the advice industry as a financial adviser offering investments, lending, and insurance services to my clients as well as supervising other advisers offering similar services. I have had the opportunity to work with some extremely talented and dedicated professionals, but I have also been witness to clients being sold investments that did more for the adviser’s bottom-line than the long term financial health of their client.

Having started my career in the mid 1990s, I have seen the internet revolutionize the financial services industry allowing access to information that once was reserved only for the large institutions that could afford to pay for that access. I have witnessed the cost of transacting a trade go from hundreds or thousands of dollars per transaction to basically, zero. We have seen the popularity of open-end mutual funds with internal fees of 2 percent to 3 percent of assets decline as investors have moved trillions of dollars to index exchange traded funds, ETFs, with internal fees of less than 10 basis points or .01 percent!

As more and more people became comfortable completing transactions on-line, companies have created marvelous tools for consumers of financial products to analyze their personal situation and forecast into the future. With these new tools and access to some much information, is advice dead? My response is a resounding NO!

I would argue that advice today is as important — if not more so — than at any time in history. The reason is that access to information is not wisdom. The internet allows a wide distribution of information, often with the intent to sell you something, that may not be your best solution. Don’t confuse data with knowledge. Making sense of all of the information, both real and fake, is a key component of advice in today’s fast-paced world.

Another reason that advice is more important than ever has to do with the wiring of our minds. We are emotional beings and despite our best efforts, most of us get emotional. We get emotional about our relationships, our sports teams and yes, our money. Statistically, institutional investors out-perform a typical individual investor over a longer period of time. One of the key reasons is that the institutional investor has a fiduciary responsibility to maintain their investment discipline. In other words, they don’t get emotional about the money. It doesn’t mean that they go home at night after a large down day in the markets without feeling a great sense of anxiety. Believe me, they do. But, as a rule, they follow prescribed investment strategies. In the long run this has a meaningful impact on the investment returns that they deliver to their clients.

So, why did I call this column, “Advice on Advice” ? In the coming weeks and months, I will share with you my thoughts on when you should seek advice versus relying on the tools that are available to you or your own wisdom. I will share websites and blogs that you may find useful in your search for wisdom. I will also arm you with questions that you can use when evaluating a potential Advisor. Many of you reading this column are more than capable to manage your own money, decide on the right mortgage structure, or decide on term or permanent insurance. I hope that I will be able to introduce you to content that helps you make better decisions in a more efficient way. Others who read this column may not have the interest, aptitude, or time to make quality decisions. For you, I will help you select the right Advisor for you and your family by arming you with information on the industry and providing the questions that you should be asking the Advisor before you entrust your hard earned money to him/her.

It is dynamic world and I do not pretend to have all of the answers. I am hoping that readers of this column will ask me questions and share useful information via my e-mail at In this way, we can all benefit from a shared wisdom.


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