I visited a local department store tonight after work. In search of new rain boots, I ended up buying a navy blue jacket but that's another story for another day. What irked me and ended up costing me time was ignorance on the part of the sales lady about simple math and the amount to which the markdown percentage should be applied.
Here is what happened.
The jacket was originally priced at $150 but marked down by 40 percent - good designer but last season's color. A sign atop the rack said that another 25 percent would be deducted from the ticketed price. A quick calculation on my part led me to believe that a $90 jacket would be sold at $67.50. Instead the woman behind the register insisted that the price of $90 was final and that it reflected a 25 mark down from the original price of $150. As hard as I tried, I could not convince her that $90 differed from 75 percent of $150. Finally, out of sheer frustration I am sure, she referred me to the manager and abruptly left her station. When I checked out, my receipt reflected a 25 percent discount from $90.
Walking home from my mini shopping spree, I wondered about the state of math education in this locale and why a simple calculation did not resonate. Worse yet, this lady was supposed to know better. It would be one thing to say "I don't know" but it is quite another thing to insist on being right when she was obviously wrong.
In the world of investing, it is arguably even more important to get expert advice. Instead of a few dollars at stake, inexperienced and/or ill-informed financial intermediaries could put $17.1 trillion in U.S. retirement industry assets at serious risk. In addition, countless financial advisers are retiring alongside their clients with worries that inexperienced persons will take their place. This could be troublesome since most experts predict that the complexities of a retirement crisis are unlikely to go away anytime soon.
According to "A talent shortage loom as the industry booms" by Jeffrey Schoeff , Jr.(Investment News, April 28, 2012), individuals in need of help may end up spending lots of time on a search for experienced and knowledgeable advisers who likewise have the patience to educate clients and recommend an appropriate long-term investment strategy as a result of getting to know needs, risk tolerance levels and constraints.
At the institutional level, staff budgets are being cut at the same time that certain investment strategies require careful diligence as relates to the use of leverage and a financial engineering component. One answer is to outsource to an independent fiduciary and/or external consultant or advisor. Interestingly, numerous firms have the budget to hire contractors but don't have the approval to hire a full-time person(s) even when salary and benefits could cost less than what a consultant or advisor will charge.
Good service provider due diligence is critical at any time but certainly if a plan sponsor is relying mostly on the capabilities of others, they need to feel confident that their advisors and consultants have a good handle on critical issues and potential solutions. Competency can help to save time and money and reduce stress. The converse is true too. Incompetency can cost an organization time and money and widen any funding gap. Either way, the role of the independent third party is expected to soar.
While robust due diligence takes time, it can help to stave off unwanted inquiries into the nature of risk-taking. Working with someone who is knowledgeable, earnest and dedicated to delivering requisite help should be seen as a big plus.