It’s just not as cut and dry as some think… passive/active, advisor/no advisor.
Years ago, I interviewed with a securities brokerage, on the investment banking side. I met with one of the managing partners and we were essentially blue-skying about whether I would be a fit for that world. (I’m not, by the way.) One thing was apparent to me during the interview: this guy was on a different planet in terms of brain power. I felt intimidated because I knew nothing about his industry at the time. After the formal part of the interview, he asked me if I could give him my thoughts on his personal portfolio.
Was the interview still going on? Was this a test? Surely this guy had the creme de la creme of managers managing his money (their offices were all over his Bay Street office tower), or perhaps he had his own trading terminal set up beside his desk to manage his own portfolio…
Nope. It was seven figures stuck in a globally allocated basket of index hugging, active mutual funds charging close to 3% per year. It must have been a test.
Nope. It was his actual portfolio. I was dumb-founded.
Then I realized that while he clearly had the brain power to be able to figure things out if given the right reading material, he had neither the time, nor the inclination to do so. He was not an expert in portfolio management, he was an expert in investment banking – within the financial services, these are completely different things. His advisor was an old school buddy, and he just delegated everything to “his advisor”.
This may be an extreme example, but it was a story I thought was worth sharing. There are a few ideas to discuss that can be plucked from this anecdote, but if anyone wants to kick start it in the comments, be my guest.