Got a kick out of a recent dilbert. It’s hilarious because it’s so true, although I’ve got this nagging feeling that 90% of the Dilbert audience doesn’t truly get the joke. The reason is because the average person probably doesn’t even know what a managed stock fund is, what high churn means, or even what front-load means. So let me break the cartoon down for you.

Part 1 – You go ahead and work your butt and have some extra hard earned cash. You are smarter than the average individual so you actually decide to save/invest some of it so you go to speak to a “financial adviser” about doing this.

“Financial Adviser” in most cases means he’s really good at advising you how to take your financial assets and put them into his pocket.

Part 2 – “Obviously this guy isn’t going to help you out for nothing so he’s going to charge you a 2% fee to manage your money. If you read the fine print it probably is an annual fee. So even if his investments he chooses for you lose money he still gets paid. Obviously he’s the expert though and you know nothing so don’t question anything he recommends for you.

Part 3 – Financial Adviser does what just about any Financial Adviser would do. Recommend a managed stock fund. Why? Because these funds have very high fees and he probably gets a cut. He’ll reassure you that this is the best place for your money because XYZ fund manager is the next Warren Buffett and he crushed the market last year (before fees were taken into account). He actively trades in and out running up the mutual funds operating costs because again this guy is a genius and knows how to time the market. Front-Load you ask? Well because I did such a good job of recommending you this fund I’m going to take 5.75% of the money you invest into this fund as a sales commission, but don’t worry you will make this back in no time because this fund is actively managed and will crush the market. You the average American who didn’t understand anything the guy said in the previous five minutes agree to it because he’s the expert and your not.

Again the sad part about this comic is that it’s not even funny. It’s dead on true in most cases (yes I know there are some good financial advisers, but most are not). I guess the point I want to make is that a good chunk of financial advisers don’t know that much more about investing than you do or could if you spent a little time doing your homework. They don’t have your best interest in mind and in most cases their financial advice will be geared toward them and their company getting as big of chunk of your money as possible.

Here are my 3 cardinal rules for people knew to investing and wondering where they should put their money.

• Never buy “load” mutual funds. (Front-End, Back-End it does not matter no fund is worth a sales commission – you are just throwing your money away)
• Never pay an annual maintenance fee to a company or some adviser managing your investments (especially if you don’t have billions of dollars)
• Invest in low-fee index funds. Index funds don’t try to beat the market they just match it. They hold every stock in a specific category and have low turnover, thus keeping costs down. Those actively managed mutual funds that the adviser is trying to sell you that promise huge market beating returns, well when expenses are taken into account 80-90% of them fail to beat the market. So odds are if you invest in actively managed mutual funds you will be worse off than the easy low-cost, no-load, no-brainer index fund that doesn’t require a financial adviser to find and recommend.