Every so often, as a stockbroker/financial advisor, I would have a client call me up or come into the office and tell me that they wanted to make changes to their accounts. Okay, I would usually say, and then I would ask them what they wanted to do and why. Most of the time they thought they knew what they wanted to do but didn’t really understand why. So again, I would ask them what they wanted to do and who suggested they do this. I had to try and figure out where they were coming from and where they were going with this.
DON’T KICK ME TO THE CURB?
I usually asked my client to come into the office whenever they wanted to make a significant change to their account. It’s one thing to buy or sell a stock but it’s another to change the entire portfolio or a major portion of it without really hashing this out with your financial advisor. If you’re not going to discuss it with me then why have me around to begin with.
So into the office would walk the client with their armload of ammunition in the form of brochures and sales literature. They would usually place all of this propaganda on the corner of my desk ready to pick it up and show me where I was missing the boat with their investments. Now don’t get me wrong, I make my share of mistakes, but I always had the best interests of the client first and foremost whether my broker/dealer liked it or not.
At this point, the client would say something like, “I feel that we need to get better returns from my investments. I want to discuss, with you, what I heard about”? I usually just nodded my head yes and let them talk. After the client told me about this great deal they heard about and how it was setting the investment world on fire and how much money they were missing out on, I would remind them that we had agreed on a plan of action when we first began working together.
YOU DON’T HAVE A PLAN OF ACTION!
Whenever I accepted a new client, I always tried to establish a plan of action. I would always ask them what it was they wanted to achieve and how we were going to get there together. Now this was not set in concrete. I kept it flexible to deal with life’s happenings. But this new investment idea of theirs was not one of life’s happenings. It was a smooth talking financial person playing on my client’s greed. I had to remind them what our plan was and what we agreed upon. Most of the time they would come to their senses. But not always.
HOW COULD YOU HAVE DONE THAT?
This post would not be complete-in the message I am trying to get across to you-if I didn’t tell you this story. I will not disclose the person’s name or occupation but this situation really got to me. I had a client in his 60’s getting very close to retiring. He had about $250,000 or so in his private retirement account. He also had a nice pension from his current employer and some money from an inheritance. I’ll use the phony name Joe for this individual. Joe was a fairly knowledgeable investor who took some risks with his money and did okay. Joe’s problem was that he thought he knew more than he really did.
One day, I’m reviewing my copy of Joe’s quarterly retirement account statement and I see that there was a transfer of funds of $200,000 at the end of the last quarter. Now I had been talking with Joe at least once a month since he became a client and he never mentioned anything to me about moving any money or any investments he was considering.
I called Joe on the phone and told him I would like to talk to him when I came to visit his place of employment. We scheduled an appointment and meet the next week. I asked Joe why there was a transfer of funds from his retirement account to what looked like an insurance company.
Joe became a little uneasy and said that his neighbor had told him about his financial advisor who was getting him a 40% return on his money. I asked Joe what was this spectacular investment that this other financial advisor had sold him on. Again Joe appeared uncomfortable and he told me it was a guaranteed sure profit insurance program in which he could not lose his money. He said he felt that we, he and I, were being too conservative.
Now remember, Joe is in his 60’s getting close to retirement. I asked Joe exactly what was this miracle investment. He told me it was a viatical-buying and selling of insurance policies on terminally ill people-and he had done a lot of research on them and this ”was” the way to go.
Joe said he knew I would not agree to this so he went and did it on his own. I told Joe he was right. I would not have agreed to do this but now it was too late. We maintained our relationship for a few months after that but then Joe retired and moved away. I never saw him again.
THE MORAL OF THE STORY
As I learned about six months later, Joe had moved out of town to get another job. It seems that that sure fire, guaranteed invest was a fraud. He had lost his $200,000 to a con-artist. There never was a legitimate company involved. I never did get any more information on Joe. One thing was for sure, I was mad as hell that he did what he did. So let me remind everyone that your trusted investment advisor is not just there to recommend investments to you but to truly put your best interests first. When you find that trust in your trusted financial advisor, “listen” to what they have to say and run all your financial ideas past them. You don’t have to agree with them every time. But running your financial ideas past your trusted financial advisor is an effective check and balance from doing something stupid. Don’t be another Joe.
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