May 14, 201307:52 AMFinancial Perspectives
with Michael Dubis, CFP
‘You can do better!’ … Compared to what?
(page 2 of 2)
3. Can you show me either a proposal or model you recommended five to 10 years ago to someone in my situation and then show how it ended up doing over time?
This is the ultimate smell test. In all the years I’ve helped clients review proposals, this one usually gets rid of the time-wasters because they’re either showing you data-mined proposals that measure success with perfect hindsight – which no one has – or they don’t have a track record that long.
I am usually put at great ease if managers are willing to answer this, even if the performance wasn’t stellar. This tells you two things if they answer it: They are honest and they are comfortable in their thinking.
As an aside and to be fair, it is often very hard for financial advisors to answer this question in specific detail because of compliance reasons, although they can show you their way of thinking five to 10 years ago. Money managers and mutual fund companies, though, should have no problem providing compliant track records.
In the end, “better” is very subjective. Better compared to what is what matters.
Michael Dubis is a fee-only certified financial planner and president of Michael A. Dubis Financial Planning, LLC. He is also an adjunct lecturer at the University of Wisconsin Business School James A. Graaskamp Center for Real Estate. Mike can be reached at firstname.lastname@example.org. This article contains the opinions of the author. The opinion of the author is subject to change without notice. All materials presented are compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. This article is distributed for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products or services described in this website or that of the author’s. Mike Dubis does not guarantee the relevancy, appropriateness, or accuracy of any outside information or links. Mike Dubis does not render or offer to render personalized investment advice or financial planning advice through this medium. All references that might be made to an investment or portfolio's performance are based on historical data and one should not assume that this performance will continue in the future. THIS COMMUNICIATION MAY NOT BE USED BY YOU AS A RELIANCE OPINION WITH RESPECT TO ANY FEDERAL TAX ISSUE DISCUSSED HEREIN AND IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY YOU FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON YOU BY THE INTERNAL REVENUE SERVICE.
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