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Written by Nathan White, CFA, Paragon Wealth Management

INDUSTRY BARRIERS

The financial services industry exists to assist people with investing by facilitating trades, providing advice, and investment management. It is a multi-billion dollar industry.

Unfortunately, much of what the industry does actually hinders investors rather than help them. Here’s how (source:  SecondeOpinions.ca):

Conflict of Interest- Most advisors and brokers provide advice to investors and get paid on the basis of selling certain investment products rather than the quality of the advice they provide.

Commissions- Most advisors and brokers are compensated by selling products. Often the riskier a product, the higher the commission.

Fees- High fees can impede investor performance. Many fees are built in or hidden making it difficult to determine the true cost and their effect on performance.

Poor Knowlege- Many advisors and brokers are professional sales people and do not have the necessary understanding of basic principles of investment and risk management.

No Performance Measurement- Most financial advisors have no record of their actual performance for client accounts. Without measurement, it is impossible to compare against alternatives such as other investment managers or a benchmark. Performance measurement determines the quality of the advice.

Lack of Accountability- Most financial advisors and brokers do not accept fiduciary responsibility over their clients. They are not accountable for the quality of advice provided or to the adherence of proper investment management principles.

MARKET MOVEMENT

The stock market is an uncertain and volatile place. Recent market activity has reinforced that view. Due to the uncertainty, many people think that investing in the markets is a no win game and either refrain from investing altogether or place their money in low yielding instruments such as savings accounts, money markets, or CD’s which don’t provide them the return needed to attain their financial goals.

People also tend to refrain from investing or sell their investments during extended down periods in the market — right at the wrong time!

The best defense against a bad market is to hire a good active manager or change to a more conservative allocation that will keep you invested through the difficult times.

Don’t be discouraged by the barriers to investing. If you are aware and understand, you will overcome them. Those who can successfully navigate them will succeed financially and set themselves apart from the masses!

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.