I hired a tax accountant because I had moved from New York and didn't want to deal with two-state tax returns. He printed out my tax form from Quicken and left in forms I wasn't even supposed to have to do (estimated taxes for New York, for example). I had to call him because I was confused and he said that the computer just does that. Really? So why did I hire him when the computer just does that and I needed to call him and straighten it out?
Next year, I hired a different tax accountant. She had a very fancy office in a building in San Jose and many coworkers went to her and recommended her. I gave her all of my (relatively simple) tax information sometime in early February. Early March, still no tax return. I call her and she says "It's been sent to packaging and should be there anytime" (whatever that means). Early April, I realize I have to leave for Japan on a business trip and I call again. It turns out she had mailed it to my address from two addresses ago. And even though I called her a few times, she never thought it was suspcious that after two months I still hadn't gotten my tax return from her. No one knows whose hands that tax return ever ended up in, but fortunately they don't appear to have been an identity thief. Oh, and she had the gall to try to bill me the full amount. Since then I've done my own taxes.
Last year I decided to investigate a financial planner after years of investing on my own. Mostly my wife and I just wanted to get a list together of all the stuff we had to do like wills, trusts, life insurance, blah blah blah. But I was willing to consider her advice for investments and the idea of her managing my money.
This was in June, 2007. Her suggestions?
- Buy a new house. She was convinced that the real estate market was still the best investment around in June 2007. Common knowledge today is that real estate peaked in 2006, which I argued with her at the time and she didn't believe.
- Invest in US Large Caps for the most part.
This is the one that gets me the most. Someone I know who is around retirement age has a financial advisor who has had the gall to say the following to her amidst this crisis:
- Don't sell, because if everyone panics and sells, thats just drives investments down more.
- He believes that right now, with the Dow at 8500, we're in a great buying opportunity.
- He wrote a letter where he quoted Warren Buffett saying something like "When everyone's fearful, I buy, when everyone's buying, I get fearful."
The responses I've told this person to pass on to the financial advisor are:
- I will not lose my money because you believe selling drives prices down for others. It takes years and years to get confidence back in battered stocks. Therefore, I will sell. And if these look like a good investment later, I will buy them again.
- The Dow will bottom out at no more than 7700, which is where it bottomed out in 2002 -- a time of crisis much less ominous than this one.
- If you believe that people should be buying now because others are fearful, why weren't you selling when everyone else was buying in 2006-7? Why weren't you selling CROX short?
Buffett has billions upon billions of dollars. He can turn a company around with his money. A grandpa investing $100K can't do that. If he invests $100K, he's riding on the coattails of others. He has to sit around hoping that that money will go up.
So it's great to quote Buffett to encourage people it's a good time to buy when others are fearful, but in my opinion, financial planners should be the ones telling us to sell ahead of the curve. Not telling us to buy into overpriced markets or become bag holders for the rest of the world, as the financial planners I've mentioned here are wont to do.