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Earning It

We make money the old fashioned way: We earn it.

Forget all the movies he was in, John Houseman may be most famous for this line he spoke in those old Smith Barney ads. They resonated with people that much. But that’s all it was, a line read by an actor, a mere marketing gimmick. And if you don’t know why this is by now go have a read of “Scumbag Storytime” over at Interloper. As I commented on his post, my experience tells me stories like these are more rule than exception.

However, I have said in the past that there are a handful of advisers out there that truly do “earn it.” I can count the ones I’ve met on one hand. So what separates these guys from the pack? How do they “earn it”?

First, they prevent you from making horrible decisions. When it comes to investing people have a knack for doing the wrong thing at the wrong time. Some of these bad decisions result in complete financial ruin. For example, during the height of the housing bubble I was advising my clients to limit their exposure to residential real estate as much as possible (see this, this, this, thisthis, etc.). If a guy can keep you out of major trouble he’s doing something right.

Second, he can set you on the path to effectively preserving and growing your wealth. This is a broad category that includes advising you about your entire financial picture. A guy who earns his fee is a guy that sincerely thinks about you, your financial situation, your goals, your risk tolerance, your personal values and then points you in the right direction. A huge part of doing right by a client in this way is not overcharging them for this service and this is where I have another problem with the average adviser. If you have a million bucks is it worth it to you to pay $10,000 to $30,000 every year just for this kind of consideration? Hell, no. “First do no harm” applies as much to advisers as to doctors and exorbitant fees do real harm (can we also talk to doctors about this?).

Finally, the best advisers are great investors. On your behalf, they make smart decisions with your money to avoid undue risk and to take advantage of great opportunities. They earn their fee because they literally pay for themselves in real investment returns.

Most of the guys I’ve met in the industry are wannabes. Many of them are the worst kind of idiots – the kind that don’t even know they’re idiots. They’re doing  harm without even realizing they’re doing it. And this is not to mention the guys unabashedly seeking patsies with accounts ripe for churning. True “advisers,” true to the definition of the word, are few and far between. So don’t buy the line – like a lot of marketing, it’s no more than a gimmick to part you from your money.

Chart of the Day

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Apple announces earnings after the market closes today and every trader on the planet, whether they have a stake or not, will be watching. See the rest of my charts here: Reading the Tea Leaves.

Hit the Links

  • “Scumbag Storytime” (Interloper)
  • Goldman Sachs Made $400 Million Betting On Food While People Starved (Business Insider)
  • If You’re a Mutual Fund Person – Why Not Warren Buffett’s Berkshire Hathaway? (CanadianFinanceBlog)
  • The Behaviors that Destroy Your Financial Health (and How to Avoid Them) (LifeHacker)
  • David Einhorn bought more Apple as it dropped in Q4 (ValueWalk)
  • Apple is Winning (Pinterest)
  • Ray Dalio, along with most mutual fund managers, really dropped the ball last year (Fortune)
  • Why It’s Time to Cut Back on Social Media (Harvard Business Review)
  • Google: Psy earned $8 million on ‘Gangnam Style’ on YouTube alone (Quartz)
  • Teemu Selanne’s work ethic keeps him young (CBC Sports)
  • Tim Ferriss–11 Tricks for Perfect Sleep (Huffington)
  • Is There One Right Way to Run? (NY Times)
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