By Nicholas W. Stuller
Ron (real first name, his last name he preferred to not share) wrote to me to share his experiences with financial advisors. The following is almost verbatim, aside from some non-material editing:
“I have a financial advisor and I trust him. I’ve had other advisors through the years. Most were good, but nothing more. I had one that was excellent and then there’s my current guy who is beyond excellent. Through the years, I’ve learned quite a bit about investing and I often steer my portfolio according to my market anticipations. However, when I was young, I was very mistrustful of others. It was only with experience and age that I overcame my prejudice against financial advisors. Part of my turnaround might be due to my own fortunes—once you pass a certain threshold of wealth there’s no avoiding some form of financial advice.
My first exposure to a financial advisor was back in the late ‘70s. My parents were investing in the money market and getting really good returns. I only remember the advisor as an elderly man and my father insisting that his investment money should be ‘safe.’ Once the CD boom ended the money got parked into a conservative tax-free fund that never generated much return. The advisor passed away and my parents never moved the money from the fund. But they complained about the lack of return and how you couldn’t trust these financial guys. (Looking back at it now, I realize they got exactly what they asked for: something very safe.)
But that was my parents’ experience, not mine. I was in my thirties and was my own advisor. I had a small nest egg but, due to my parents’ experience, I distrusted financial advisors. I lived and worked in New York City at the time. I attempted to learn about investing, but had little time for it. I bit the bullet and contacted an advisor. He was young and aggressive enough to make me doubt his advice. I suppose I feared he would steal my money.
I knew I wanted to buy stock in a company large enough not to go bust and small enough to get a short-term profit. I did some reading about a sugar refiner called “Sucrest” (now known as Ingredient Technology Corporation). They had signed a long-term contract with some nation in the Caribbean and were in the process of negotiating long-term contracts with a cane supplier in the Philippines. Some Sucrest historical info mentioned bad profits due to a Caribbean hurricane unexpectedly increasing the price of raw cane. I reasoned that the chances of a Caribbean hurricane and a Philippine typhoon occurring in the same year were remote and I liked the idea of the company paying a steady price for raw cane. So, I decided to go all-in on Sucrest and watched it rise from ten to twenty over a year. It then started a slow decline, dipping as low as twelve but then rebounding. I sold at 14 making a 40 percent profit in two years, which was fine with me. That’s how I managed to buy my first house at age thirty.
In 1990 I was contacted by a financial advisor from Eaton Vance. He was pushing Oracle as an investment and used some shady math to prove his point. (I have a background in engineering so I can spot bad math when I see it.) I said no thank you. Little did I know that this young man, despite the bad math, had actually given me excellent advice. Oracle stock was just beginning a steady rise that lasted a decade. But, not knowing the future, I decided to invest in CDs. (A poor investment choice at the time.)
I had no financial advisor until after I retired. By then my parents had died and I sold their house. I needed to do something with the money. In 2004 a local financial advisor from Edward Jones knocked on my door. My wife and I liked him, so we decided to invest some money with him. The returns were acceptable so we invested some more. Eventually we put almost all of our money in. The first advisor got a promotion and moved to NYC. We were assigned a new advisor and my wife and I were worried. The new guy wanted to restructure our investments. He wanted us more global and less USA-based.
Meanwhile I had been reading the monthly Edward Jones magazine and I had started watching Jim Cramer on TV. I had my own Scottrade account and was doing slightly better than the Edward Jones account. I fancied that I now ‘understood’ the market. (Deluded fool!) I found myself agreeing with the new advisor’s investment ideas. He recommended diversifying my portfolio, becoming more international. In fact, I overloaded my account with international companies and my advisor thought this as wise. This strategy paid off and the returns became stunning. He found some really good bonds for me too. After several years he rebalanced me from mostly international to more U.S.-based and, once again, the returns were great. Lately he’s taken a fair amount of money out of the stock market and put it into CDs and bonds.
I’m probably not a typical investor. My relationship with my advisor is this: I tend to be too aggressive and he tempers my choices. We study the account every year and, if the investments get too skewed in any particular direction, we re-balance. If the market gets very volatile my advisor always calls. I’m very happy with him. As I get older, I’m less inclined to push my account towards my opinions and more receptive to my advisor’s advice.”
This story first appeared in my book THE TRUTH SHALL SET YOUR WALLET FREE: Secrets to Finding the Perfect Financial Advisor, published in 2018 by Post Hill Press.
Nicholas W. Stuller is the Founder and CEO of www.MyPerfectFinancialAdvisor.com, the premier matchmaker between investors and advisors using personalized data, proprietary algorithms, and deep industry experience.