Last weekend I was able to watch the long awaited financial drama Wolf of Wall Street with my wife during our “date night” while my parents watched the kids. I wanted to to see it in theaters but as some of you know two young children make it pretty difficult to get out. I’ll admit, with a running time of 3 hours the movie was fairly long but I’ll tell you it was worth every minute. In fact I recommend every single person watch Wolf of Wall Street in order to understand these 3 core principles about the investing industry.
Nobody Cares About Your Money More Than You
I’m not going to spoil the movie for you but it is based on a true story and from the previews you can already gather that these brokers were completely out of control. What the previews don’t show you is the clear lack of integrity and honesty in regards to these broker’s clients. They didn’t care at all whether their clients made money, in fact if clients made money they were instructed to push them into new investments with the gains from their previous trades. These brokers didn’t care that people were risking their life savings or their child’s college fund. The only thing on their mind was the commission from selling securities to clients.
Now think about that for one second… from the start of any investment your broker/financial advisor is going to make money whether that investment turns into a gain or a loss, is that right??? The amount of money & trust I see individuals placing in these “professionals” baffles me on a daily basis.
Nobody cares about your money or your personal situation more than you! Please let me be clear, not all brokers or financial advisors are idiots or crooks but you would be amazed at how many ARE. This is why financial literacy is important, take the time to educate yourself on basic financial principles in order to ensure your financial success. I’m not suggesting that you take over your investment portfolio tomorrow but learning financial fundamentals will at the very least allow you to understand the strategies & concepts your broker/advisor is recommending you take. Don’t be afraid to tell them no or that you don’t understand, THEY WORK FOR YOU.
2. Brokers & Financial Advisors Have No Track Record
Wouldn’t it be great if you could type in a broker’s/financial advisor’s name or company and see their investment track record for past clients??? Well sorry for you, because no software or website exists (to my knowledge) because if it did you would see a huge shake out in the financial industry, some investment firms/companies would crumble within a year. The hard truth is this, a broker/financial advisor (contrary to popular belief) isn’t evaluated on their investment track record. They are evaluated on the amount of trades they broker or the amount of money they have under management!
Never forget this industry is a business, it’s not a club or organization looking out for your best interest.
Tell me something, as a business owner, would you rather have an employee who was very knowledgeable about their profession or someone who made you money consistently every month? Obviously in a perfect world you would have both but what if you couldn’t? What if you only had one choice… it would be the employee who makes you money consistently, right?! Of course! You’re not in business to be knowledgeable, you’re in business to make money and this my friends is how the financial industry operates. If you don’t remember anything else from this post please remember this…. The financial industry is about sales FIRST, knowledge/performance SECOND, and clients THIRD.
So the next time the stock market is crashing and your advisor/broker is on the phone begging you not to sell your shares but is instead advising you to “dollar cost average” because you have a long investing timespan. Think about their real intentions, are they really giving you that advice because they care about your family, your children going off to college, or your retirement? Or are they really thinking “Please don’t close your account with us because we will lose money?” You be the judge.
3. You Are Responsible For Your Financial Future
I have seen tons of friends and family lose money investing with brokers and financial advisors. I personally lost a large amount of money using a broker. It was a very long time ago when I was “young & dumb” but I can speak intelligently about this issue because I’ve lived it every step of the way. In fact, I almost lost a very valuable friendship because of this broker. My good friend at the time recommended him to me and said I would make a fortune investing with this guy. Well as you can probably imagine not only did I lose a sizable amount of money but my friend lost most of his initial investment as well. When I called the broker to close the account he actually had the audacity to tell me people have bad runs in the market all the time and he all but guaranteed if I invested with him again I’d not only make my initial investment back but more gains on top of that. This guy had no shame!
For a long time I held my friend at fault, he introduced me to a crook! I lost so much money and I was furious. I had allowed the trust in our friendship to be transferred to an absolute stranger all because I had absolutely know idea what I was doing and I was greedy. I thought to myself, “This guy lives and breathes stocks, he has to know what he’s talking about, he’s going to make me rich and I don’t mind paying him along the way.” WRONG!! Somebody, ANYBODY, please tell me about a friend or relative you know who became rich because they trusted and left all their investment decisions to a broker or advisor.
My friend and I eventually reconciled a couple years later but let’s be honest, instead of being furious with him in the first place I should have taken personal responsibility for my own decision. Nobody held a gun to my head forcing me to invest my hard earned money with a broker I knew nothing about. It was my own decision and it was my own lack of financial knowledge that caused me to lose money, nothing else.
Make no mistake, I’m not advising you to take over your investment portfolio tomorrow or next week. But I truly believe if you start your financial education right now, someday you will be able to manage your own investments. If managing your investments doesn’t interest you or simply believe you don’t have the time then at the very least you will be knowledgeable enough to hire a competent broker or advisor.
Have you had any bad experiences with a broker or financial advisor? Do you feel that everyone should have a basic fundamental knowledge of the finances?