The financial services industry has “a lot of lazy advisors” and there are many “mediocre firms,” according to John Hailer, president and CEO for the Americas and Asia of Natixis Global Asset Management at a media luncheon in Manhattan on October 25, 2016. This is the first time I have come across a professional in my industry who makes these points about my peers and the companies for which we represent. After reflecting on Hailer’s complaints I have to agree that the combination of lazy advisors and mediocre firms mean the industry’s criticism is earned. Hailer went on to say that there are firms in the advisory industry that have brought on regulatory problems. Embroiled in fake account scandal, for example, Wells Fargo’s chairman and CEO John Stumpf, resigned as PBS reported on November 13, 2016.
Since 1979 I have seen the titles of securities licensed Registered Representatives go from being known as stock brokers, to financial advisors, to wealth managers. My peers tend to be polite, educated, well- spoken and well-spoken individuals who genuinely endeavor to do what’s best for our clients. We are highly suitable to be nice guests at the weddings of your children. Unfortunately, even with the best of intentions some of us don’t actually have 30 years of experience, we have 1 year of experience repeated 30 times. We were often taught to represent certain products that we come to know very well. Instead of demonstrating we have learned anything new, since we know the old story so well, we continue to use those products for the rest of our careers.
“We are more alike than unalike, my friends.” - Maya Angelou
Since we are encouraged with the relentless TV ads to take a list of medications to your doctor to prescribe for you, allow me to offer you these questions to ask your financial advisor. According to me, instead of being product driven we should be more helpful by working with investors on their particular goals.
1. If you are working the question is, how much money will it take for you to make work optional when you’d like?
2. If you are not working, the question changes to what asset level do you need to maintain to keep work optional?
3. What is your reasonable withdrawal speed limit?
4. If you die too soon, how much money do the survivors require to replace lost income?
5. What is risk to you?
6. What has happened in the past that you never want to experience again?
7. What do you imagine that could happen with your money in the future that you never want to go through?
8. To be better prepared for next time, what did you and your financial advisor learn after 2000-02? How about 2008-09?
9. How long did it take for you to get back to even the last time(s) things went awry? Could the time frame have been reduced?
10. Are you hearing words like buy and hold, hold and hope, or sit and take it? If so let me suggest that do with your financial advisor what you are in the practice of doing with your medical professional, get a second opinion.
“The people who are crazy enough to think they can change the world are the ones who do.” -Steve Jobs
Since I am on my soap box, let me address another profession with which we work closely, economists. I have yet to meet an economist that wasn’t highly educated and intelligent. My problem is that with a traditional economic education, too many economists fail to offer informed opinions about how the economy works. According to Harry Dent, “I hate to say this, but most economists are useless!” Investors look to economists to forecast the future. It’s not an easy job. But to explain things after they happen isn’t of much value. As George Gilder put it, there’s a difference between information and ‘knowledge’. Too many economists tell us it is not impossible to see past this election. What’s more the ‘data driven’ Fed appears to only attempt to forecast the next 18 months or so. On the road of life it is helpful to see around corners.
I don’t blame economists for having a poor understanding of business. After all, few have ever run a business and fewer ever will. I don’t blame economists for not studying demographics. It’s just not part of their education. That said, studying the buying behavior of ordinary consumers based on age wasn’t part of my traditional training either. I had to pay for it. But some of us get our best insights from thinking outside the box from real- life business education. So it is refreshing to know professionals like Lacy Hunt, Ph.D., of Hoisington Management Co. Hunt is a classically trained economist who also studies the real world. He has a profound knowledge of the proved and disproved that he knows from his foundation in academics. Hunt even speaks English.
“I skate to where the puck is going to be, not where it has been.” - Wayne Gretsky
Hunt makes it clear when an economy is creating a productive investment or involved in a wasteful and/or speculative endeavor. You see, when a productive investment becomes unproductive, the money velocity predictably slows down, which can ultimately result in a financial crisis of deleveraging and deflation, like in the Great Depression as well as in the past two decades. Just as the weather has four seasons, the economy operates in cycles too. It may be that traditional economists don’t believe in cycles, believing they have the power to set a thermostat in the room and the machines will do all of the work to keep the temperature comfortable. With good intentions there are those who would have us believe governments don’t have revenues and expenses. They don’t have to invest productively for the future. In fact, governments can borrow forever with no consequences.
I implore you to ask good questions as you make certain you get good answers from someone. Please be careful of those who have bumper sticker announcements that are way too simplistic for the work that needs to be done. Avoid following mainstream pundits who can’t help you to see the big picture. At the end of the day, we can agree that it’s almost never the bus you see that can disrupt your day when crossing the street. It’s almost always the bus you can’t see, can’t time, and can’t name that can make life, if you’re lucky to survive, completely miserable. We want your money to last as long as you live.
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The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by NPC. To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an indvidual’s goals, time horizon, and tolerance for risk.
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