Does My RIA Need Live-Trading Experience? (Part 3)

Today will serve as the “stream of consciousness” part of the program.

Part 11 inspired me to compose the following e-mail as an attempt to solicit feedback on the title subject:

> I’d like to know your opinion about whether live-trading
> experience is something a good financial adviser should have.
>
> Personally, I think the financial industry as a whole is very
> deceptive. Most financial advisers are salespeople. They have
> the marketing pitch, they have the “supporting data,” and they
> have the skill to sell clients on different funds or corporate
> products. Many television commercials stress the importance of
> “personal relationships” between advisers and their clients.
>
> I think the disconnect arises because clients believe their
> advisers are the ones who make them money. In fact, without live-
> trading experience the advisers are limited in knowledge about the
> mechanics by which money is made. I think much of this knowledge
> is based in details about execution, how products are traded,
> working the bid/ask, slippage, different types of orders, etc.
>
> The big question I wonder about is: DOES THIS MATTER?
>
> I want to say there must be some edge to having an adviser
> who actually does the trading or has live-trading experience.
> Is that the case or is it just as well that all the traders for
> one firm be located in a central office in New York or Chicago
> where they focus on nothing but getting the best execution and
> trades for all the adviser firm’s [anonymous, to the traders]
> clients nationwide?
>
> I’ve read a handful of articles over the years that talk about
> important criteria to identify when searching for a competent
> financial adviser. I have never seen “live-trading
> experience” listed as one of these criteria.
>
> And yet… I’m hard-pressed to believe the average investor
> wouldn’t benefit more from hiring an adviser who does the
> trading him/herself rather than hiring the typical adviser
> who does nothing more than sales.

I’ll conclude this sidebar in the next post.