Planners on commissions have ‘axe to grind’
Australian investors “ought to be aware” of financial advisers who get paid on a commission basis, according to US investment expert and author of the bestseller, ‘Random Walk down Wall Street’, Burton Malkiel.
Speaking during a visit to Australia last week as a guest of Vanguard Investments, Malkiel said he “tends to favour fee-only advisers because they have no axe to grind”.
“Whenever anybody gets paid a commission for selling you something, there is at least a possibility that the decision has been made in the interest of the seller rather than the client.
“In general, I worry about some financial planners who want to have you (clients) do a lot of switching, particularly when they are making a commission on the switching they are doing.”
Malkiel also told a Sydney conference on Friday that the best way for investors to generate long-term wealth from the share market is by investing in index funds.
He said index funds have beaten 60 per cent of average fund managers in the US over three years, and 80 per cent of active mutual funds in the US were beaten by a low cost index fund over 10 or 20 years.
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