By far, the hardest part of managing other people’s money is not just the research that goes into building a portfolio or picking the specific assets, but the psychology of how a client feels relative to the current marketplace and their specific goals, which are not always realistic. Of course, as a fiduciary, there is a lot of information needed from a client before recommending portfolio allocations and assets. We all wish we could easily fulfill most clients’ request to “just make money, but don’t lose a dime.” Unfortunately, as professionals, we realize that has never been possible, nor will it ever be. However, what I have learned is that the more education you provide a client about the complexity and nuances of investing, the better they become not only as investors but as clients.
The desire of many people—maybe even some of your clients—to achieve wealth tends to drive many into making decisions based on their emotions rather than logical ones based on reality. Emotional choices usually provide some immediate short-term gain, while in reality most have unfortunate long-term consequences. A prime example of this is many times champion American Quarter Horse exhibitor, Rita Crundwell. The Dixon, Il. comptroller is charged with embezzling $53 million of public money since 1990 to fund a lavish lifestyle, which most people who knew her assumed was due to her highly successful horse breeding business. As we are now learning, the reality of Ms. Crundwell’s ‘wealth’ is something quite different. Assuming all the charges against her are true, how does someone make such bad emotion-based decisions, all for the desire of short-term greed/perception, rather than the ethical reality that wealth comes from a long-term, patient process?
The same premise holds true in the investing world, where people invest based on their perceptions rather than reality. It seems many investors are continuously looking for the Holy Grail of wealth—since they perceive that the newest trading strategies, market timing trends or the most recently discovered guaranteed investment somehow will create enormous amounts of wealth overnight. Furthermore, we have mass marketing campaigns from large financial institutions that promote the perception that opening an…[sws_button class=”” size=”sws_btn_small” align=”sws_btn_align_right” href=”http://www.advisorone.com/2012/05/19/creating-wealth-isnt-quick-or-easy-so-why-do-so-ma?page=2″_blank” label=”Read The Article…” template=”sws_btn_dandelion” textcolor=”” bgcolor=”” bgcolorhover=”” glow=”sws_btn_glow”] [/sws_button]
Andy graduated from the University of Alabama-Birmingham with a B.S. degree in Accounting. He is a Registered Investment Advisor Representative of Money Management Services, Inc and holds the designations of CPA (Certified Public Accountant), AIF® (Accredited Investment Fiduciary), CTS™ (Certified Tax Specialist), and WMS (Wealth Management Specialist). As an advisor, Andrew specializes in comprehensive financial planning, estate tax planning, personal taxation planning, retirement income distribution planning, wealth accumulation, personalized portfolio management, and fiduciary investment management services.