Who is the most dangerous person in the Investment World?
- The investor themselves?
- The adviser?
- Or the money (fund) manager?
It’s a hot competition!
It is our view that the one who has the ability to be the most dangerous of all is the investor themselves, for one very important reason above all others – they control the whole process. Like the conductor of an orchestra, the investor sits in the middle holding all the players in the palm of their hands.
Nothing happens without the investor’s consent. So the investor has the ultimate control of their destiny. Sure, many an investment is sold by an adviser, often forcibly and against the investor’ better judgement and certainly many a fund manager packages up a risky or inappropriate investment into a cosy looking secure structure. But investors can avoid these with discipline, with due diligence and with education.
Investors often end up with the investments they deserve. They end up with the advisers they deserve. Investors control everything else that happens, they can knock the top domino which drops all the rest.
Let’s look at the historic facts; the investment industry has been built on the distribution to investors, ordinary people looking for homes for their money, of PRODUCT. The investment industry has been built on selling product, often juicy fee producing products dressed up in “sheep’s clothing”.
The investor has been seduced by the slick, by the secure looking, often too good to be true, packaged investment. No investor should truly feel safe with any investment, which is why diversification has always been such bedrock of great financial planning.
Yet the industry selling to the investor makes every effort to build safe investments or ones that appear juicy (returns not fees).
Investors should demand more, not more of the same, but more honesty, more education, more transparency and more forthrightness. Never ask for a guarantee, never expect returns from “no risk” investments, never expect an adviser or fund manager to be able to tell you the future.
The investment industry is slowly changing, with more and more advisers working on the investor not their money, with more and more fund managers looking to create steadfast investment processes which can stand the test of time, but they remain in the minority, are not always easy to spot or find.
The investor’s job is to find them, the gems and to avoid the old school types who borrow your watch to tell you the time, or more pertinently, take your money into products to generate their fee.
We give two tips to investors looking for the better approach:
- When engaging with an adviser, how much do they ask about YOU and how much do they ask about your money? We believe that any adviser who doesn’t concentrate at least 80% of their time on you, as opposed to your money, still work on the past methods.
- Look for money managers who have a process and who can articulate or explain this process in a really straightforward fashion, and who promise nothing more than a concerted effort at getting the right results.
We always suggest to an investor that the most important job they have is choosing their financial adviser, as this is the first of the dominos. Yet so many investors pick their adviser as if they were selecting somewhere to find a lunch time snack.
Investors end up with the investments they deserve, to get the very best results: get the very best help. The best advisers, the best money managers and the rest take care of itself. Investors need to focus more on the quality of the people and firms they use more than any other part of the process. No-one has a crystal ball that works.
The most dangerous person in the investment world is the investor who picks their helpers as if they were choosing a football team in the school playground.
And remember, one final point, there is no golden rule to say only use one adviser or one money manager, the medical profession learned centuries ago the value of a second opinion. Can the investing profession and the investor do the same?
Caveat Investors!
