Why Advisors Hate Barefoot

Question


Hi Scott,

My husband and I would like to share with you a conversation he recently had with our financial adviser.

Husband: “My wife and I have been looking into our shared finances. We think we are paying too much for financial advice on your managed super fund. We will be switching to a Hostplus Indexed Balanced Fund.”

Adviser: “Sounds like your wife has been reading the Barefoot Investor.”

Husband: “I bet that’s the bane of your life.”

Adviser: “Yes. Hmf. Well, our fund is better because …”

You can guess the rest. We are so thankful to you, Barefoot!

Meg

Scott's Answer


Hi Meg,

Just for kicks, let me visualise the rest of the conversation:

Adviser: “You’ll get better returns from our actively managed fund, which employs some of the finest fund managers in the world and has a history of outperforming the market.”

Meg: “Go on.”

Adviser: “Fees are important, but they’re not the only consideration. You need to consider long-term performance.”

Meg: “Do you have access to exclusive hedge funds?”

Adviser (panting): “We most certainly do!”

Meg: “Well, did you read about the million-dollar bet Warren Buffett made in 2007? He bet that a basic no-brainer index fund that simply tracks the market would outperform the most elite hedge funds over 10 years. Guess what happened? The $1 million invested in the expensive hedge funds gained $220,000 … the ultra-low cost index fund gained $854,000.”

Adviser (closing his folder): “I’m late for my next appointment.”

Scott