Advisor Firms Be Crazy

Advisor Firms Be Crazy

If you look up a variety of financial advisory firm websites, they all look practically the same.  I discovered a major theme during the process of doing just that.

Most firms tout their expertise in investment management.  Many reference their unique investment process, their proprietary in-house research, or that they have some process for identifying the best managers.  It’s always something to that effect.

The more I think about it, the more I think most firms are just plain crazy.  If everyone has a uniquely special investment process, then doesn’t the process lose its luster to the average investor?

What is more likely the case is that every firm is attempting to convince you that their process is better than everyone else’s process.  It’s insanity.  It’s grasping for straws.

If an investor truly took the time to evaluate multiple firms, which ones would stand out?  How does a firm differentiate itself from the crowd?

I think it’s relatively simple, though not easy.  Or maybe it is easy.  It may be a lot easier than the posturing that is currently going on.

Recently, I was listening to the Invest Like the Best podcast by Patrick O’Shaughnessy with the team at Ritholtz Wealth Management.  Before you read on, please note that this is not in any way an endorsement of their firm, but an observation of what is hopefully the future of financial services.

Throughout the podcast, authenticity was abundantly obvious.  The beauty of these guys is that it doesn’t appear that any of them have any kind of real filter.  They say it like it is.  Unfortunately for the majority of investors, transparency and unbridled honesty are not the norm in the advisory industry.

Saying it like it is without regard for whether or not you do business with them is refreshing.  Even if you had a $100+ million portfolio, I don’t get the impression that they would change their perspectives or offerings in order to accommodate if your philosophies don’t align.  They know what they are good at.  Many people may not realize how different this is for the rest of the industry.

The advisory industry in general terms is in the business of selling to consumers.  This shouldn’t be a surprise considering these firms regardless of size are still for-profit organizations.

But when you think about what you truly want in a firm, I’m betting these are the answers:  Honesty.  Competence.  Integrity.  Placing the investor’s interest ahead of the firm’s interest.  Transparency.  Consistency of message and philosophy.  Clear and ongoing communication.

What’s crazy is that the above list should be table stakes for being in the advisory business.  But it just isn’t.  Notice that nothing on the list above says “unique proprietary in-house amazing investment process”.

Many firms are out there touting a sales story.  Their investment process is their sales pitch.  It’s where they start.

Rather, if you listen to the Ritholtz guys and other firms like them (in terms of authenticity) such as Bason Asset Management, Abacus Wealth Partners, or PlanCorp, they tell their story.  It’s not sugar coated.  You’re either a good fit, or you’re not.  They want to ensure they have clients that they can genuinely help rather than people they can sell.  They want to work with people who fit their personalities.  (Yes, businesses can have personalities.)

My advice to investors is not to try to do it yourself.  It’s not that you can’t.  It’s simply that the risks are too high to try.  Why not leave it in the hands of people that actually make your success their business?

I’d bet that the reason many people don’t seek help is that they don’t know where to turn.  They don’t know who to trust and so they disregard it as an option.  Instead, try to seek out advisors that have honesty and transparency as part of their very being.  In the end, you’ll be glad you did.

Long story short, the advisory industry is headed in the right direction.  As firms like those above continue to have great success, it’s a matter of time until that becomes the new norm.

Lastly, if you have the time, give the podcast a listen.  In fact, subscribe to the Invest Like the Best podcast, it’s fantastic!

Final disclaimer: I have no relationship with any of the firms mentioned in this list.  I am not compensated by any of them in any way whatsoever.  In fact, I do not know any of them personally.  I’ve just been following many of these firms for long enough to imagine that if their message is that genuine and consistent, then I can’t imagine their service being any different.  There are plenty of other firms to consider that do it the right way, so if you know one personally, then seek out their counsel.  These are just a few that I follow.  Good luck in your search!



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