Investment Professional
Are you happy with your investment portfolio? Do you smile a warm smile when you think about your investment advisor? Before you answer those questions in your mind, please read The Story of Financial Happiness. Your answers may be different at the end of the story from what they would be right now.
The story was shared with me by one of my clients. This client owned a few small businesses and also had investment real estate. His insurance coverage was varied due to the nature of his ventures. Every year when the premiums would come up for renewal my client would get phone calls from numerous insurance agents soliciting his insurance business. My client would politely explain that he had the same insurance broker and the same insurance coverage for years and he was happy with both.
One year he fielded a call from a young man. The young man asked if he could submit a proposal for my client’s business. Out came the annual answer. My client told the young man he was happy with his insurance coverage. But the young man persisted. He told my client he was new in the business and had more time than clients. He could put together a proposal comparing my client’s current coverage with other insurance providers. My client, impressed with the young man’s persistence, agreed and shared with him the relevant data.
The young man called back with the results. He had done an apples-to-apples comparison. Same coverage, same deductibles, same quality of insurers. It turned out that the young man could save my client $16,000 a year. If you could save $16,000 in a major expense category, you’ve just increased your income by $16,000. That’s a big number for most small businesses.
My client realized the happiness he had in his own mind and had conveyed to the insurance people over the years was not true happiness. He told them, and himself, he was happy because he didn’t know which variables he needed to look at to determine his true level of happiness. When my client told his long term broker how much money he could save, the broker said, “Hey, we’re friends. I’ll lower my premiums to match the ones you’re looking at.” I can’t repeat what my client told the broker because I am a graduate of a Catholic university where such language was forbidden. But you can use your imagination. Just as my client wasn’t really happy, he wasn’t really friends with the guy selling him overpriced insurance. The point to this story is this: You don’t know what you don’t know.
A few years ago I was at a fund raiser atop Mt. Washington at the LeMont Restaurant. (Quick tangent: I drove a beer truck one summer during college and delivered to the LeMont. It’s always nicer to enter through the front door than the delivery door). I was having a nice conversation with an older, friendly woman. We were discussing two of my favorite subjects: art and architecture. Twenty five minutes into our conversation she asked what I did for a living. When I replied “I’m an investment advisor” the smile ran away from her face. The pleasant conversation we were having was done. Her body language became defensive. She leaned away from me. I had the feeling she wanted to cross her fingers like they did in vampire movies to ward off Bela Lugosi. “I’m happy with my investment advisor,” was her stern reply.
I told the woman I had no interest in talking to her about investments. That wasn’t the reason for my trip to the LeMont. I did, however, share with her the Story of Financial Happiness. She listened to the story, gave a forced smile, and said she had to catch up with her friends. She walked away. She probably forgot the Story of Financial Happiness as soon as she walked away and never again thought about the point to the story.
Don’t be like that woman. Don’t walk away from this point to the story. Find out which investing (and insurance) variables are relevant and valid and see if you have reason to be happy or reason to change your investments/insurance situation. When I started delivering beer I thought I was happy. Warm weather and cold beer all day long. In and out of a variety of drinking and dining establishments in the city. Everybody was happy to see me. I was bringing the beer.
But my happiness was short-lived. The barrels of beer, which weighed more than I did at the time, got heavier and heavier as the summer wore on. The buzz I would get in the morning made me sluggish and drowsy in the afternoon. The pay was lousy and my co-workers hated working with anybody who had ambition. As soon as I learned the variables of the job, my happiness turned to “I can’t wait for this summer to be over” unhappiness.
Looking back the only happiness my job delivering beer brought me was that it gave me the incentive to get back to school and bring my 1.6 GPA up over the 2.0 mark and eventually to a respectable 3.25. That job got me my college degree. I’m happy I persisted and I’m happy I had the college experience I did have. That’s true happiness.
In closing, I’ll ask again: Do you have true happiness with your investment portfolio?
This piece is based on a story a client told me. When people tell me they’re happy with their financial advisor, I no longer roll my eyes. I just give them a copy of this article to read. This article is near and dear to me for a few reasons. The main one may it’s the first one time I used the phrase “You don’t know what you don’t know.”
I wanted to use one of my favorite words, epiphany, in the title. It didn’t make it there but found its way into the first sentence. I was trying to determine which criteria were valid and relevant in determining when to enter and when to leave the stock markets. The finding was an epiphany for me.
The year 2008 was an extremely important year for me—for various reasons. The major market decline motivated me to examine the way I had been doing business, how I was structuring portfolios, and if my knowledge of the capital markets was as extensive as it should be. This article details how I turned a negative into a positive.