Speaking of Investment Advice, Time Will Tell

Remember when?

If there’s one consolation prize we seasoned tax, financial and wealth management veterans earn after a few decades in the business (for me, since 1988), it’s being able to wax nostalgic about “the good old days.” If nothing else, reminiscing can be a nice break from all the tax-season number crunching.

I still remember our first flight to St. Louis in 1999 – back when TWA was still in business – to meet with our then-new colleagues at The BAM ALLIANCE and Dimensional Fund Advisors.

Our corporate shirts were fresh and crisp. Our Palm Pilots were state of the art. The BAM Conference consisted of me and my partners and maybe five other firms.

We’d heard of Modern Portfolio Theory, Efficient Market Hypothesis, and active versus passive investing … but we were still learning what they really meant to us and our clients.

Remember when you were fresh out of school, embarking on your own career? How much of what you had just learned then still applies today?

Of course the tools and technologies have evolved dramatically over the years, as have your administrative obligations. But what about the basics – such as how an ounce of prevention is always preferred over a pound of cure, and how the best first step to diagnosis is listening to your patient’s concerns?

If anything, your appreciation for these sorts of essential truths has only deepened over time, as you’ve seen how often they turn out to be oh, so true.

Now, imagine a world in which you were instead taught misinformation about what constituted excellent healthcare.

What if you had been taught that it’s best to let an abscessed tooth fester, so you could collect more fees when the time came to yank it out?

Imagine how much time and energy you’d have to expend to unlearn the mistruths before you could set yourself and your patients on the right path.

Unfortunately, in the financial world, too many fresh, would-be advisers start off on just this sort of wrong foot!

In our world, there are plenty of “training” opportunities that teach new recruits that it’s okay to ignore the decades of evidence that I and my colleagues have long employed when helping families build and maintain a sensible approach to their wealth care.

Instead, they’re often subtly and not-so-subtly taught that meeting corporate quotas and pushing the highest-commissioned products is preferred over first and foremost advising investors according to their highest financial interests above all else.

Some financial freshmen (and women) end up trapped in this unfortunate model and never find their way out. Others manage to unlearn what they’re taught early on, becoming better advisers in the long run after learning the hard way what bad advice looks like.

I wish the financial industry weren’t like this. But the fact that we’re still wrangling over whether or not the Department of Labor’s fiduciary rule should go into effect leaves me skeptical over whether we will ever live in a world in which the only kind of professional financial advice available is the kind that is strictly in your best interest.

All this does leave me feeling incredibly lucky about my own early education. At the time, many of today’s now well-accepted practices were still quite new and even harder to find along the beaten paths of financial learning.

I’m talking about basic, common sense strategies such as diversifying globally to manage market risks, minimizing unnecessary costs, and participating in efficient markets instead of trying to outsmart them.

Some of the terminology may have changed over time, but these and nearly all of the other essentials I learned back in 1999 remain as true today as they’ve ever been.

And now, I’ve got decades of experience through myriad markets to deepen my appreciation for the value they bring to wise wealth management.

Do you know what has been one of the biggest benefits to having a consistent strategy? I’ve never had to back-peddle on my advice.

I’d like to think this has made it easier for those who have heeded my advice through thick and thin. It’s simpler for me too, since I’ve never had to stop and remember what conflicting messages I may have told one client over another.

Tax season is hard enough without needing to worry about complex, sales-oriented double-speak that I was never any good at to begin with!

I like the way Vanguard founder John Bogle explained the logic of giving good advice in his recent New York Times op-ed, “Putting Clients Second.”

Commenting on whether fiduciary advice should become the law of the land, he said:

“Honestly, it seems counterproductive to go to war against such a fundamental principle. It simply doesn’t seem like a good business practice for Wall Street to tell its client-investors, ‘We put your interests second, after our firm’s, but it’s close.’”

Even after all the years he’s been around, apparently Bogle is no better at double-speak than I am.