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How stupid is your financial advisor? Putting aside for the moment the difficulty of spotting the deliberate criminal activities of a Bernie Madoff, how can you know if the guy at the bank or the brokerage or the insurance company taking your IRA money has a brain in his head? How can you know if the financial advisor for your 401(k) plan, lecturing you from a script on the wisdom of asset allocation, has advice worth taking? To put it bluntly, how can you know if your financial advisor is a dolt? It can be tough because most financial advisors are fairly upright people on the outside: sincere, clean, and honest. But what lurks in that skull? A recent survey indicates that the majority of financial advisors, besides being superficially presentable, are also pretty stupid (InvestmentNews):

President Obama reached his much-ballyhooed 100-day milestone last week, but most financial advisers were in no mood to celebrate.

An exclusive InvestmentNews online survey conducted last week found that a hefty 63.9% of advisers did not approve of his overall performance as president. Only 36.1 % of the 1,010 advisers who responded to the survey thought he was doing a good job.

Worse yet, 68.5% said they had either “not too much” or “no” confidence in his ability to fix the ailing economy, while only 31.2% had a “fair” or a “great deal” of faith in his capabilities on that front.

If you think your financial advisor in one of those who have "not too much" or "no" confidence in Obama's ability to fix the economy, ask him if he believes in "correlation." Specifically, ask him (and more than 90 percent of them is a "him") if he believes there is a correlation between a Democratic president and a healthy stock market and a Republican president and a lackluster stock market. Ask him who was better for the economy — Clinton or Bush Junior.

Insist that he explain this chart, showing that $10,000 invested exclusively under the Democratic presidents of the last 80 years — who covered half that span — would have grown to more than $300,000. By contrast, $10,000 invested in the nearly 40 years of Republican presidencies since 1929 would have grown to a measly $11,733. Print a couple of copies and bring them to his office. Show him that the average annual rise in the S&P 500 under all Democratic presidents of the last eight years was 8.9 percent. The average annual rise rise under Republicans during the same period was 0.4 percent.

If you are unhappy with your financial advisor's rationale for why this is so, or if your financial advisor is unaware of these facts, or if your financial advisor questions the factual nature of this, your next step is simple. FIRE HIM.

This has nothing at all to do with political litmus tests. People who work in financial services seem to self-identify as disproportionately Republican, but to be effective any financial advisor worth his salt should exist exclusively in the reality-based community. The InvestmentNews survey shows that nearly two-thirds of financial advisors choose not to live in reality. Their advice is based on hearsay, belief, and hunches — not the kind of people you want anywhere near your money.

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