Last year I wrote a sort of Mutual of Omaha series about Brokers in the wild. It was supposed to be in good fun.
I covered the self-destructive, yet lovable Brokerus Stockus: The Wile E. Coyote Broker. Brokerus Friendus: The Wholesaler. Brokerus Maximus: The Branch Manager. And my first effort was Your Stockbroker: The Alpha. I won’t lie – It was a pretty snarky series of posts, which I’m sure none of my longtime readers were shocked to see. And then I moved on.
But as my PR person likes to tell me all the time now, “the internet is forever”, and sure enough, two weeks ago one fine reader William W. Wagner (WWW for short) wrote in with a comment that made me stop & think.
Now, for those of you who don’t know who Bill O’Neil is, he’s the founder of Investors Business Daily. He’s been a pretty inspirational person throughout his life. He started off as a stockbroker, started learning computers in the 1950′s at his first firm. In the early 1960′s he’d invented the now famous CAN SLIM strategy, which is still alive & well in Investor’s Business Daily today. Tens of thousands, if not hundreds of thousands of people are using his system in some variation or another.
At one point IBD claimed to have “nearly 1,000,000 readers”. And to date Bill O’Neil’s company has also created & launched MarketSmith, the goto research tool for many market traders. He’s written books, and as WWW states, Bill O’Neil does think a “good stockbroker” can add value.
So, now you know a little bit about Bill O’Neil. And what’s my point?
My point is this… your stockbroker is not Bill O’Neil. Well, probably not. Your stockbroker, especially if that’s what they still call themselves, is probably a very nice person. Sweet, pleasant — or maybe just a character you enjoy listening to when they call with another idea. They may even be honest. That actually isn’t the problem. It’s the environment in which they exist that’s the problem.
Simply put, if you, the client, don’t do something (anything) transactional, they don’t get paid. And that’s a model that, rightfully so, is becoming the breeding ground for a species that is quickly becoming extinct. As such, your stockbroker is kind of a dinosaur.
That’s just the reality. And knowing that reality, why would you take advice from someone who ignores a secular trend so blatantly obvious?? A trend that has been happening (not quietly for 20-30 years). Why would they, knowing these facts, perpetuate their career another day longer? Too hard to change? Maybe, but that’s not your problem.
And frankly, it’s the financial equivalent of hiring someone wearing a leisure suit. Fun to have around? Absolutely; there’s always leisure to be had when they are with you — but let’s face it, some of the laughing & pointing is also a bit deserved.
Now that’s not to say you can’t find a good one, who’s honest, who will make a difference (for the better) in your life…I’m just saying that the likelihood of that happening in this day & age, is about as likely as your next broker being the next Bill O’Neil.
Here’s what I did take away from WWW though. I’m too negative sometimes. At least maybe my writing sounds that way.
I’m not negative really, just jaded. I’m actually quite hopefully about the future of financial services. I’m excited about new companies being born, becoming something people value having in their lives again; there’s just the disconnect now, because the new leaders haven’t fully emerged.
All of that being said, I thought I’d put together a list of things to look for in a good adviser. You’ll notice I said Adviser (with an ‘e’)… because frankly I think trying to find a good stockbroker today is like hunting for a brand new penny in a pile of coins, when you could be flipping through dollar bills. Oh sure — they’re there, but why even bother? Especially when there’s so much more opportunity to find someone who can truly change your life for the better. (Read: Advisor or Adviser)
Advisors add value. I’ve probably saved my clients hundreds of thousands of dollars in taxes over the years, and in some cases millions of dollars in estate taxes. I’ve saved them miles of paperwork, I’ve saved them hours on hold with the bank about a specific question I could answer in a minute. And I’ve probably helped removed years of uncertainty when clients were never sure what was possible.
It’s not because I’m an attorney or accountant, I just knew enough to tell the people what to ask their attorneys & accountants. It’s not because I’m minting money for my clients hand over fist, frankly most of what we do is indexing anymore & managing expectations. I just happen to have the tools & knowledge to show them a very clear picture of what to expect within a range of reasonable assumptions. Assumptions a professional can make, because I do this everyday — day in, day out. If you did it day in & day out, you probably could too. It’s not easy, trust me — I know. But it is light years away from a stockbroker.
So, to be clear– even though you think I’m being hard on some people in our industry – I’m here because I heart Wall Street. And the same goes for many professionals working in our industry — most of us are married to Mrs. Market. So, how do you know? How do you know if you’ve got someone good — I mentioned a list…
Well, that’s another post, for another time.
But I do hope that I answered your question William W. Wagner, If that is your real name… and thanks for reading.