We all want the best in everything, the best vacuum cleaner, the best smartphone, the best investment allocation. Many businesses make a good profit in helping people figure out what are the best: Yelp for restaurants, TripAdvisor for hotels, CNET for tech gadgets, Morningstar for mutual funds. When I write blog posts, I have to make sure to put the word “best” in the title.
The second best get no love. Their minor flaws get magnified and picked on when people defend their choices for the best. However, the best become the best when they want to be better than the second best. Without the second best, the best may not have been born in the first place. Without the second best on their heels, the best won’t be that good for long.
Robo-advisors such as Wealthfront and Betterment can be seen as the second best. No human advisor to talk to? Dishing out a portfolio allocation too fast? Not considering other accounts and 100 other factors? Fees go up with the account balance? The automated products from Vanguard and Schwab can also been seen as the second best. Extra fee for putting you in an all-in-one equivalent? Opportunity cost on keeping cash? All these are legit concerns that stop them from being the best or ideal, but when you see so many people are doing it much worse, you wish all of them could just go with the second best.
A financial services company notorious for selling products with high expenses and fees did a social media marketing campaign. Their [human] advisors/salespeople asked their clients to “like” them on Facebook. When multiple friends liking their advisor at this company popped into my Facebook feed, I felt really bad seeing they were thanking their advisor while being robbed blind. They would be much better off going with a second best robo-advisor.
Should I say something? People don’t take unsolicited advice well. They chose their advisor. They don’t want to feel stupid about their choice. I kept my mouth shut. I won’t say anything unless I’m asked.
My friends may or may not have heard about robo-advisors. If they had looked into them, they may not have been able to tell whether the negatives raised were major or just minor. As a result they ended up staying with what they have, which is far worse.
The lesson? Don’t let the perfect be the enemy of the good. Get out of the worst first. Of course you have to know what’s bad to begin with. Knowing what’s bad is much more important than knowing what’s the best. If you don’t know what’s bad, at least ask.