Advisors

Most people who reach out to me have read my stuff. In our calls, we usually end up clarifying a concept, or talking about how some idea applies to their specific situation. Normal, healthy conversations.

Then there’s the other, smaller group. They found me maybe through the podcast, skipped the blog entirely, and open with some version of: “You’ve got decades of experience in financial markets, so how do I time them profitably?”

I call these the odd conversations, because by now I’ve accepted something important: I am not going to change these people’s minds in an hour. Maybe someone else can. I can’t.

“Personal Finance Is Solved” Is a Dream

I chuckle every time I read that line, usually posted right after Vanguard shaves another basis point off a world stock ETF. We are very, very far from “solved”. Not because I have some vested interest in pretending otherwise. Ask yourself this: will elite athletes ever stop hiring coaches? Joel Embiid learned how to play basketball watching YouTube. That was the beginning, not the end.

If you want a medical analogy, forget the “take this painkiller and you’re done”. Think therapy instead. Every client shows up with their own set of problems, and there’s no single prescription that fixes all of them. I mean, if you care about your health.

If it were actually easy to do, I’d tell everyone the same thing: build a diversified portfolio out of whatever building blocks you like, then dial leverage up or down to match your risk profile. Do that, and most portfolios out there would end up looking pretty similar. But “easy to do” is doing a lot of work in that sentence.

A recent Rational Reminder episode discussed research showing financial advisors often give the same advice to very different client profiles. To their credit, the hosts flagged the obvious caveat: it was a survey, and advisors probably don’t put the same effort into a hypothetical as they would with a paying client sitting across the table. Fair point but I’d still bet the result holds up.

Some advisors just tell clients what they want to hear. And I get why. It’s frigging free money. You pay me to parrot your own opinion back to you? Sure, why not. Fair enough. But sometimes I feel the RR gang leans too much into this. I’d think a responsible financial advisor would try to converge the extremes — the guy who’s fine with 100% stocks and the one who’s scared of stocks — toward a more balanced view. That’s precisely the point where the survey ends up returning the same advice for different profiles.

It’s not laziness on the advisor’s part, just an attempt to provide value in the job. My guess is the average advisor faces far more conservative clients than aggressive ones, which makes it just the responsible thing to do: push them to up-risk their portfolio.

The podcast also dug into risk-averse investors chasing “guaranteed returns”. I’ve written this before and I’ll write it again: a ‘guaranteed’ real return is not easy to come by. Chasing a nominal one usually means taking on more risk (the bad type) than most people realize, especially over mid-to-long horizons. It is the same issue from a different angle: investors don’t take enough risk (the good type) to hit their own financial goals. And the advisor’s job isn’t to rubber-stamp whatever idea the client walks in with.

The RR guest used a phrase I love: the “financial doctor.” A good doctor pushes you to quit smoking and drinking, even though the relationship isn’t mandatory and you’re free to walk. A good advisor should push clients in the right direction the same way, not just nod along because the check cleared. Achieving low vol, positive real returns require complicated asset allocations and a level of risk that the untrained eye judge as excessive.

The Pensioner Inflation Blind Spot

Later in the same episode, the guest made a point that stuck with me: pensioners are more exposed to inflation risk than people still in the workforce. Three reasons:

• Debt. Fixed-rate debt is actually a good thing when inflation rises, the real value of what you owe shrinks. A fixed-rate mortgage largely hedges your housing costs against inflation (maintenance costs aside).
• Salary. If you’re working (and not living in Italy) your salary tends to rise with inflation, sometimes with a job change required to get there. State Pension might be inflation-linked, but for most retirees that’s a small slice of total retirement income. Translation: only the “poorer” pensioners are actually protected here.
• Stocks. Over a full cycle, stocks are a solid inflation hedge. Not year to year, but over time. Yet standard doctrine keeps pensioners light on stocks because of sequence-of-return risk, and heavy on bonds instead, which happen to be one of the worst assets to hold when inflation is climbing.

Put those three together and you’d expect pensioner portfolios to look a lot less “low risk” than they did back when nobody worried about inflation. And yet, the same people who understand this exact problem still say it’s fine to keep a bond-heavy “low risk” portfolio, because that’s what the client wants.

I will never understand this. Back to the doctor analogy: a doctor isn’t doing their job if they let a patient keep a life-threatening habit just because changing it feels less stressful in the moment.

Surfing cycles is soooo easy

Since we’re here, a reader sent me a paper written by a financial advisor, and it got me thinking about how easy it is to write a convincing case in either direction for basically anything (financial markets related).

Take interest rates. Everyone treats this as the “easy to predict” market. Meanwhile the rate market is, technically speaking, fucking huge…and even my 4-year-old son understands it’s not sitting around waiting for you to exploit it.

The bear case for inflation writes itself: Trump wanting influence over the central bank, unsustainable sovereign debt that eventually needs monetizing and, not to even mention, the cluster fuck that is the Iran war.

The bull case is just as easy: weak economic growth, AI, layoffs.

And then there are the wildcards even top economists can’t agree on: deglobalization and an aging population could push inflation either way. This is exactly how it should be. If there were a clear, obvious case on either side, the market would already be there. Think of it as the stock market’s classic “wall of worry,” just applied to rates.

Market cycles exist. Bubbles exist. Saying so is easy. Claiming you can exploit them is a completely different animal. And honestly, a slightly crazier one, because if you genuinely had that ability, it wouldn’t take long to become filthy rich. What these people are really claiming, whether they realize it or not, is that they can always be on the right side of every market wave: dodging every bear market, banking an easy 20% a year. Doesn’t take Claude to figure out how few years that takes to become the richest person in Italy.

The fact that you’ve got “20 years in financial markets” on your bio and you are not the richest person in Italy tells you everything: you cannot time the cycles the way you claim you can. So stop bullshitting people. yes, cycles exist but no, timing them is the solution to the problem. Because you cannot do it.

What Advisors Are Actually For

There’s a reason Sinner name-checked his coaching staff after winning Wimbledon back-to-back. They’re not magicians, they didn’t hand him the secret recipe for a serve or a forehand that wouldn’t require hours of training, blood and tears. What they gave him was structure, feedback, and someone pushing him in the right direction when it would’ve been easier to coast.

That’s the job. Not fortune-telling. Not parroting back whatever the client already believes. Just showing up, doing the unglamorous work, and pushing when pushing is the right call.

What I am reading now:

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