Short Takes: Zweig on Financial Advice, Benefits of Annuities, and more

After getting a rare haircut that was bad enough for me to notice, I was reflecting on the transition from barbers many years ago to hair salons today.  It used to be that barbers cut hair in about 5 minutes, it was inexpensive, and they did it mostly their way. You got to say how short you wanted it but not much more.  This state of affairs suited me.  Now that gender-based price discrimination in haircuts is gone, hair cutters feel the need to take 20 minutes clipping my hair a millimeter at a time to justify the high price.  Maybe we could go to a “fast cut” and “slow cut” pricing system so that I could get a simple cut quickly.  There are some women this would work for as well.  It used to be that women who wanted a simple cut were unfairly discriminated against when they had to pay the higher “women’s price.”  I would even pay today’s high price if I could just sit in the 5-minute cut chair with no waiting.

Here are my posts for the past two weeks:

Which Accounts Should I Spend from First in Retirement?

Calculating the Amount of a CPP Survivor’s Pension

Retirement Income for Life (Second Edition)

The Richest Man in Babylon

The Great Thing About Managing Other People’s Money

Here are some short takes and some weekend reading:

Michael Kitces interviews Jason Zweig, financial journalist for The Wall Street Journal, to discuss the current state of financial advice.  As a financial advisor, “you train the public to believe that portfolio management, which is such a commodity product that you can get it from a robo-advisor for a few basis points, is somehow worth 100 basis points a year when it’s not only a commodity product, but it’s not very valuable.”  “Meanwhile, the financial advice, which really is valuable, which ought to be customized and individualized and time-intensive, you’re giving it to me for free, and you’re signaling to me that you’re giving it to me for free.”  “[T]he public has been trained for decades to think that financial advice is the giveaway product and that portfolio management is like the secret sauce.”  Zweig sees this as a barrier to charging more for individualized financial advice and to letting computers do portfolio management at low cost.

The Rational Reminder Podcast interviews David M. Blanchett, head of retirement research for Morningstar Investment Management LLC, whose energy and clarity of expression made for a quality podcast.  Among other topics, he discussed the benefits of annuities.  Unfortunately, most annuity payments are very vulnerable to inflation risk.  But the analyses I see to demonstrate the value of annuities assume inflation is some low fixed value.  We can’t know future inflation with any certainty.  What if we eventually have higher inflation?  Doesn’t this uncertainty eliminate the benefits annuities bring to a retirement portfolio?

Canadian Couch Potato takes a peek under the hood of TD’s new One-Click ETF Portfolios.  He finds they have a lot more active components than he’d want.  Their management fees are a little higher than Vanguard’s Asset Allocation ETFs (0.25% vs. 0.22%).  I wonder if the activity within TD’s ETFs will generate extra trading costs or income taxes as well.

Andrew Hallam explains why he doesn’t include “play money” in his portfolio.

Tom Bradley at Steadyhand collects some Warren Buffett quotes that apply well to today’s markets.

Robb Engen gives an update on his family’s financial progress over the years.

Big Cajun Man was one of the many Canadians whose logins for their CRA accounts were wiped out.  I had a similar experience with my Service Canada account.