Wednesday Wealth Recap
- Are you more of a do-it-yourselfer, or do you prefer to trust a professional? With investment minimums and costs way down, managed accounts have become a viable option for many investors. Alexander Green explains how to decide if you should be using an account manager.
- The No. 1 secret to financial success isn’t financial at all… As Nicholas Vardy discussed yesterday, psychology is not just a critical factor in successful investing… it’s the only factor.
- If you’re a regular reader, you probably already understand the importance of trailing stops for your investments. But just in case you need more proof, Chief Income Strategist Marc Lichtenfeld recently shared how a stop loss saved him thousands of dollars.
- The S&P 500 has hit 53 all-time highs so far in 2021. But there’s another number – one that’s much scarier – that investors are also talking about right now. Chief Trends Strategist Matthew Carr explains what it is and whether you should be worried.
In native cultures, medicine men wield power because of the community’s belief that they have magical powers.
To reinforce their mystique, these crafty connivers invent words and phrases that their followers can’t understand. The idea is something like “If you don’t understand what I’m saying, how can you doubt my power?”
Modern-world medicine men – doctors, lawyers and, yes, brokers – sometimes do the same thing. Like their predecessors, they often wield power over their clients by verbally intimidating them.
Many people (consciously or not) put their brokers on pedestals of reverence. As a result, they are reluctant to question the advice they get, or, worse, they feel compelled to follow it out of some sense of submissive gratitude.
The truth is that brokers are nothing more than tradesmen. They have knowledge and skills that they sell. To earn their fees, they must work hard and well for you.
Earlier this week, my friend Alexander Green explained how to determine if you should be using a financial advisor.
Whether you decided that you could benefit from a managed account or you already have one, I want you to change the way you think about your broker.
First, promise yourself that you will not let them bully you – that you will actively and consciously be the boss.
Think, “I am paying good money. If they don’t prove to me that they’re an expert, I will fire them.”
And when you get advice, instead of thinking, “I had better do what they say,” think, “This person may know their field, but they don’t know me. I am the sole judge of what is best for me. Only I am qualified to decide what I should do.”
Three Criteria to Use to Rate Your Broker
No. 1: Do they give you advice that is easy to understand?
A good professional feels obliged to communicate clearly with their clients. That means translating arcane language into advice that can be readily understood.
You can determine whether your broker has a commitment to communication by asking…
- Do I feel like I spend enough time with them? Or do I feel like they are usually busy and I’m taking up precious time?
- When they send me documents, do they often attach a cover letter that explains, in layman’s terms, what the documents say?
- Do I frequently feel lost or confused when they give me advice? (This should rarely happen. And when it does, you should feel free to ask questions and get clear, understandable answers.)
No. 2: Do they understand and care about your concerns and needs?
A good professional doesn’t treat all of their clients exactly the same. They understand that each has specific concerns, worries, problems and needs. A good professional takes time to understand this and tailors advice accordingly.
If you feel like you are getting cookie-cutter advice from your broker – or if you feel like they don’t really care who you are – they are not doing their job.
No. 3: Do you feel like you are in charge?
A good professional relationship is one where the client is the boss and feels like the boss. You should be able to figure out how you feel about your broker instantly.
If you don’t feel in charge, you aren’t.
If you don’t feel you can speak frankly about any fears and concerns you have, you are not in charge.
If you don’t feel free to criticize, you are not in charge.
Here’s what you need to understand: The only way you can feel like the boss is if your broker feels like you are the boss. If they don’t – if they think you are just another schmuck who needs help – you will never be in charge.
How to Make Things Right
Well… how do you feel about your broker now? Are you feeling a bit upset? Have you realized that you may be getting less than you deserve?
If so, here’s what I suggest. Call or email the offending party and tell them you want to have a 15-minute meeting about your professional relationship. If they ask why, say that you want to talk about whether “the value I’m getting is worth the money I’m paying.”
If they refuse to have the meeting, get rid of them.
If they do give you a meeting, go in prepared. In just a few simple sentences, say exactly how and why you are unsatisfied. Don’t be judgmental.
Express your concerns as statements of your future expectations. In other words, don’t say, “You talk in an intimidating way.” Say, “I want crystal-clear explanations of all your advice and full and clear answers to all my questions. Can you provide me with that?”
That’s really all you have to do. If you end up “firing” them, don’t spend a moment regretting it. Just go out and find someone better.
And find that better broker by interviewing a few different ones. In the first meeting, list your expectations and ask whether they can meet them.
Be the boss. It is your money.