Your Advisor Knows Best

“When it comes to communicating with or passing judgement on your advisor’s contribution to your investment program, it’s best to avoid trying to determine whether it was you or the advisor who screwed up. Neither of you are to blame, but together you are the solution.”  A quote from A Maverick Investor’s Guidebook.

There are a good many things your advisor would like to remind you, but communication between client and advisor (or fund manager and advisor) is a delicate matter.  For example, clients have an uncanny ability to remember the bad things that happen, and forget the good.  When they do remember, it is customary for the client to dump responsibility for the bad on the advisor, and on the other hand the client will take full credit for investment successes.  This is cool because:

–         The client is after all paying the way (and a capable advisor is concerned about clients’ results, not their own ego)

–          Angering a client will no doubt mean a lost client, who in turn may be poorly served by the next advisor

–          Losing a bunch of clients over one’s ego means losing one’s livelihood

Your advisor is constrained by a superior understanding of risk and market psychology and is professionally obliged to recommend what is prudent.  If you are blessed with an advisor who is a ‘maverick’ – which I define in the book – and knows from study but also experience a little (the most we can understand is a little) about how the financial world turns then consider yourself fortunate.  But also remember your advisor has the difficult job of trying to reign in your enthusiasm when your  mood (yes, this a shot at you) begins to be infected by the media and the hype of a rising stock market.

I can promise you under these circumstances, you will ‘think’ you are as smart or smarter than your advisor, and you’re not!  You are like a gladiator who charges into the arena believing you can not only survive but actually WIN, bare-handed and blindfolded against several armed and expert killers.

Just think back to the summer of 2009, or even the summer of 2010.  No doubt your advisor was hinting (remember, the relationship is a delicate one) that it might be wise to just accept the fact that the financial crisis did some damage, but circumstances should improve and perhaps getting more aggressive with your investments might be wise.  Your advisor had to spit this out despite your ornery disposition at the time.  You didn’t believe you or anyone was capable of making a winning decision.

A typical client will have completely forgotten the discussion and any such ‘hints’ by now, and if not forgotten altogether then no doubt the same client is now complaining: ‘You’re my advisor, you should have been more persuasive.’ 

You were reluctant to move against the investment herd and act upon learned advice when the market tanked, and are anxious to go “all-in” now that the market (has been and) is raging higher.  Now is the perfect time to ignore your volatile instincts and actually listen and act upon the advice of your advisor.

Not convinced?  Click on this link and see if you recognize anyone?

About Mal Spooner

Malvin Spooner is a veteran money manager, former CEO of award-winning investment fund management boutique he founded. He authored A Maverick Investor's Guidebook which blends his experience touring across the heartland in the United States with valuable investing tips and stories. He has been quoted and published for many years in business journals, newspapers and has been featured on many television programs over his career. An avid motorcycle enthusiast, and known across Canada as a part-time musician performing rock ‘n’ roll for charity, Mal is known for his candour and non-traditional (‘maverick’) thinking when discussing financial markets. His previous book published by Insomniac Press — Resources Rock: How to Invest in the Next Global Boom in Natural Resources which he authored with Pamela Clark — predicted the resources boom back in early 2004.
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2 Responses to Your Advisor Knows Best

  1. Rich says:

    I admit I am enjoying reading your blog even though I have very little interest in the world of economics and finance to be honest.

  2. benard kabutha says:

    would like more blogs on finance and economics

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