Financial Advisors Are Getting New Scrutiny

I have long suspected it was true that financial advisors are to be avoided for the most part, as it is claimed here. The article's writer seems to also not really needed confirmation that "on the whole, investors who use a financial adviser tend to underperform do-it-yourselfers."

Furthermore:

"Advisors actually tend to lower returns, raise portfolio risk, increase the probabilities of losses, and increase trading frequency and portfolio turnover relative to what account owners of given characteristics tend to achieve on their own "

"... the advisers in the study suffered from the same biases that often make lay people such poor investors. They chased hot stocks and dumped ones that cooled off. Because they thought their job was to outperform the market, they felt a compulsion to do something — anything — when the right move was to stay put. Sprinkle fees and commissions on top — some of which reward advisers for being active traders"

Seems to me that the typical investor might go through these phases:

1. When inexperienced and doing it on their own, a new investor indeed makes just these same errors as above.
2. Additionally, a young investor often finds he is forced to make terrible decisions by default: buying stocks when the economy is good and selling stocks when the economy is bad, due to the effect a bad economy has on the funds available to invest.
   
3. At some point the survivors of this pummeling try to get some help. Now it is the turn of the professionals, 99% of them?, to screw up just as outlined above.
   
4. Veteran investors now make a decision. They either learn how to find a good advisor or an advisor who will follow instructions, learn how to do it themselves properly, or seek out shelter in super-safe investing. If they seek out shelter in the form of just trying to find someone who they can turn it all over to, letting go completely, well, meet Bernie Madoff.