Who Made Money as the Market Tanked?

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Speaker: Investors as a whole lost more money in 2008 than in any 12 months stretch since the Great Depression. Yet one group did really well. And believe it or not, that group is financial advisors. So, while most of us spent the year watching our assets sink, financial planners, according to a survey this spring, saw their income rise by 10 percent. In fact, planners on average reported earning more than $215,000.00 last year. Not bad, considering the pain that people paying their salaries were going through. But how could it be that advisors enjoyed a fat raise while their clients' assets were vanishing? Well, it might be because of so-called survivorship bias. In other words, so many financial advisors had to close up shop last year that the only ones left to talk to the survey takers were the best and most successful. Now, that's Darwinism at work. Another possibility is that clients required a lot more handholding as the markets unraveled last year, and naturally, planners charged for their time. Whatever the reason, there are a few things to note from the survey. For instance, one-third of planners have been in the business fewer than 10 years, meaning you've likely been an investor longer than they've been at their job. Another trend is that more and more advisors are making their money from fees instead of commissions. That's good from your perspective, since it reduces the incentive for the planner to sell you investments that reward him or her more than you. I suppose one key take-away from this survey is the reminder that the best way to get rich in the long run isn't necessarily to buy investment products, but to sell them, or perhaps even better, to manage them for others.

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==== Transcribed by Automatic Sync Technologies ====