When I first got into the industry of advising clients, my first impression and thought process was that I had to be a great stock picker, and/or shoot for the highest possible returns for my clients…but at 22 years old what did I know. What really transformed my entire thought process for my career was when I participated in a lecture given by a 40-year-old veteran of the business. Now, this was not an elective lecture but it was part of my training at Merrill Lynch in 1985. As this 70-year-old gentleman stood in front of me with his bow tie, large rimmed glasses, and penny loafered shoes, I prepared myself for one long boring speech.
As I almost fell asleep halfway through his lecture, he made a comment, that at the time meant nothing. As I look back and remember his commentary, I realize his words have stayed with me and formed most of my professional life of advising clients for nearly four decades.
His exact words were:
“You know, many young brokers, (that’s what they called us in the ’80s), and even some of the older but less successful ones, believe that our primary role when working with clients in portfolio management, or that investment success is based on portfolio performance.”
He then said loudly and clearly, “BUT IT’S NOT”,
That is the point where my ears perked up and I was excited to see where he was going with this. After all, I always thought it was only about getting the best return of finding the next great stock.
He went on to say….
”It’s the behavior of the investor that will be the number one determinant of a person’s investment success or failure. And one of the noblest functions of a broker is as a behavior modifier.”
I have found this to be as true today as it was when I first heard it in 1985. Investors continually make mistakes that have nothing to do with the direction of the markets or the allocation in their portfolio, but their behavior during times of uncertainly and extreme volatility. Mistakes that many will not be able to recover from and will only come to regret over their investment lifetime.
So, when prospective clients ask me about “my track record” it makes me believe that they are prepared to judge me on the basis of one number. A number that probably doesn’t exist, and wouldn’t mean anything even if it did. So, over the previous years, I have learned to answer this question with full confidence and respect, although it took many years of real-life experiences before I was able to do so. The basis of which an investor should judge me, or any other advisor for that point, is his/her ethical standards, the devotion to his/her clients’ best interests, and his/her professional competence as a planner and a behavioral coach.
If you judge your advisor based on these criteria, your financial future, and the future of those you care most about, you will always be safe. However, if you base it on a number you will always be searching for the next best thing.
Please keep this in mind as I expect volatility and uncertainly to continue to be extreme over the next few months.