[Country is South Africa but I am also interested in this in the context of the U.S. / Europe]
A good friend of mine has trusted a wealth manager with her sizeable portfolio for the last 6 years. Her goal has been to maximise profit over the long term. As a friend I offered to take a look at her investment portfolio. There are red flags; namely:
- no ETFs; only active investments (fees are between 2-3%)
- overly complicated portfolio consisting of ~20 actively managed funds
When looking at the growth of her portfolio, it has barely kept up the inflation rate of (6%/year); and the net worth of the portfolio would be significantly larger had she invested in a low-fee global ETF. Here is the analysis I did (y-axis linearly scaled to conceal real amounts):
I can only conclude that this wealth manager is either:
- taking advantage of my friend
- clueless about long-term investing
Is a wealth manager legally liable for poor investment advice? It only took me a book and a few blog posts to gather enough information to fully appreciate how bad this portfolio is.
Another look at it: When we go to a mechanic for a vehicle repair, we trust the car mechanic to repair only what needs to be repaired and nothing more. Sometimes this doesn't happen and we get ripped off. One might lose out on a couple hundred dollars at worst (I would guess?). However the difference between good and bad investments on a sizeable portfolio can amount to strikingly large differences that cut away at earnings year after year.
Is her wealth manager in any way legally liable?