Inappropriate asset allocations can enrich advisors at the expense of investors. Investors have recourse when such misallocation occurs.
On September 2, 2025, the CEO of Vanguard told Fortune magazine that retirement savers should have no more than 40% of their portfolio in stocks. Greg Davis has been CEO of Vanguard for 20 years. This CEO stated that the appropriate allocation is no more than 20% domestic stocks, no more than 20% foreign stocks, and the rest in fixed income. By “fixed income,” he means bonds.
This departs from the advice of many advisors. Advisors rarely invest in bonds. One reason is the low commission bonds pay stockbrokers and financial advisors.
Inappropriate allocation can also mean too many alternative investments. Commonly referred to as “alts” they are inherently risky. Regulators and many internal brokerage rules limit such investments to 10% of a portfolio. Alts can pay a commission 10x greater than a share of common stock.
Financial professionals, such as stockbrokers, wealth managers, investment advisors, and financial advisors, have a duty to recommend investments in your best interests. Other professionals must also, at the very least, recommend only suitable investments.
Contact Jeff Pederson with questions about inappropriate asset allocation.
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