The CXO Study
Between 1998 and 2012, US based CXO Advisory, ran a study measuring the accuracy of recommendations made by 'market gurus'. They looked at 6582 forecasts made by 68 experts. On average, these experts accurately predicted market direction 48% of the time. We had a look a the results, and found that only 26 of these gurus, were correct more than half the time. This means that If you followed the advice of one of the selected forecasters , there is only a 38% chance that you will pick one who has a better chance of accuracy than a coin toss. See the full CXO report here
If financial advisers, are under qualified, and less accurate than a coin toss, it makes us wonder what keeps their industry going. How are they able to keep their jobs, and gain the trust of investors who willingly pay fees for these 'professionals' to handle their funds?
Clients see the role of the adviser as 'telling me the best way to structure my money'. The actual role of the adviser, is to 'market their products'. As with most salespeople, advisers make money from commission. Their success, and pay check, is based on sales volume, not accuracy or quality of advice.