When you’re left without your expert.

“So what if you are no longer here?”
   After years spent lecturing about money and investing, I wondered if anything had been absorbed. The question becomes more pertinent as you grow older because the advantage of time, which compounds your wealth, has a diminishing impact and your flexibility is more constrained by what you have set aside.
   Truth is, you’re in a real pickle because you have to select who to work with in a large industry with an elevated fee structure.

Ideally, you want someone with the following characteristics:

  • honest;
  • knows investing;
  • is able to explain complex matters;
  • does not overcharge;
  • tailors your investment program to your objectives;
  • is aligned with you economically.

While all financial institutions and their employees will claim to be all those things, and more, the reality begs to differ.
   Honesty, like beauty, is in the eyes of the beholder. Non-fraudulent behavior should be a given, but the definition encompasses complete transparency and true aboveboard demeanor. Integrity, unfortunately, is always a scarce commodity.
   Your contact persons will be salespeople, not investors, and will limit their investment knowledge to what they need to make a sale. They will also be paid on some form of commission-based system linked to the revenues generated by the products you buy.
   You’re lucky if in your discussions with your salesman he will avoid unpronounceable acronyms or similarly obscure buzzwords, let alone make you understand what he’s attempting to convey.
   Fees and other costs will be high, because institutions need to make a profit while paying for a big infrastructure, many lawyers and even more compliance officers (thanks in part to the friendly attitude towards banks exhibited by politicians all over the world).
   Your investment program will be 100% off-the-shelf, because your institution needs many clients to stay alive and that implies a cookie-cutter approach. Efficiency and asset gathering is the name of their game.
   Their economic interests are unlikely to even resemble yours. A business model built on large volumes, high fees and inexistent investment value-added can only survive on a very specific variation of a famous saying: “You can fool all of the people all of the time if you constantly rotate the client pool among the constituents of your industry.”

So how may you get out of this pickle? You have to do some work:

  1. If you have a friend who knows about investing, ask for his help;
  2. Define your financial needs;
  3. Your custodian (bank) does not have to be also your advisor: choose them separately;
  4. Check the credentials of your advisor; know how he will be compensated and by whom;
  5. Make sure you understand what he is saying, otherwise move on to the next candidate;
  6. Ask for a list of all costs;
  7. Set a schedule for monitoring progress and all the items of your plan;
  8. Pray a lot (works best if part of your estate goes to charity).


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