Ben Carlson is such an intelligent and articulate writer that I’m always sharing his posts about investing and financial advice. One recent post of his I particularly enjoyed was one on the value of a simple portfolio that the client understands.
This time, however, Ben’s views didn’t meet with universal approval in the financial Twittershpere. Mike Philbrick, President of ReSolve Asset Management in Toronto was one follower who clearly didn’t concur with what Ben was saying:
I’m a big fan of the team at ReSolve, and particularly their contribution to investor education (their GestaltU blog is well worth following). But I must say, I’m with Ben on this one.
To quote Larry Swedroe:
“There is no one right portfolio for everybody. The right portfolio is the one you are most likely to to stick to or adhere to, rebalance and sleep well. A good advisor tailors the portfolio not just to all of the academic research, but tailors to what the client is going to be able to stick with.”
For me, there are similarities here between the rôle of an adviser like Ben and that of a journalist like me. The world is a hugely complex place; the challenge a journalist faces is to distil that complexity into a something that the man or the woman in the street can understand.
It’s the same with the the financial markets. Investors don’t want, or need, to be blinded with science. But they do need a basic grasp of what they’re doing and why they’re doing it.
Most strategies work, but only if you persevere with them. The biggest risk for the client is that, for whatever reason, they jump ship along the way. If, when prone to stray, as most investors will be from time to time, they understand the plan, and can clearly recall the rationale behind it, they are far more likely to stay the course.
Thanks to those who engaged in this debate. And if you haven’t yet read it, I can certainly recommend Ben’s article:
Know your audience