Broker Check


Good Sir, General Patton You Are Not

| March 31, 2015
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This post is about confidence and conviction.  These are two traits that all great leaders, and investors for that matter, must possess.  In mentioning General Patton in this post’s title, I in no way mean to draw a direct parallel between war and investing.  That said, similarities can be drawn between the two in that they both present their fair share of extreme adversity.  Adversity requires strong leadership, which, if not present, can lead to poor decision making and chaos.  Chaos and your portfolio don’t, or at least shouldn’t, mix.  I was thinking about confidence and conviction – actually a lack thereof - recently after interviewing two advisor candidates who inquired about joining TrestleBridge.  Both candidates were nice people and I am not judging them as people.  On the other hand, if someone wants to join my firm and represent my brand, you bet I’m going to judge them, on a professional basis.  This process of judging is not only important for my individual company, but for my industry as a whole.

The first interview was with a young man who was actually quite nice. We got to talking about our service and investment models at TrestleBridge and his reaction was notable.  He said that he runs a rather simple system with his clients’ portfolios consisting of actively managed, pooled investments, and periodic rebalancing.  He admitted that he wasn’t sure if his business model was a good fit for our company, which it wasn’t.  But then he said something that really got my attention, in a bad way.  He said that he doesn’t know how long he’ll be in the financial advisory business, and if he were to leave the industry, he wouldn’t feel confident enough to manage his own money. 

Excuse me?  Let’s just say that this person wouldn’t be my first pick to lead me into battle, let alone manage my IRA.  General Patton wouldn’t have been impressed.  I wasn’t either.  In hearing this, all that I could think about was this advisor’s clients and how they would feel if they heard him say that about his own skillset.  Let’s just wish them the best of luck.

Our second interview was with an advisor who is a 30 year veteran of the business.  We gave this person a similar run-down of our service and asset management models and he reacted in an equally fascinating and disappointing manner.  His first question was about our investment strategies.  He asked who was in charge of the calls/decision-making within our models.  He was surprised to hear that in fact we, in the office were doing all of the research, due diligence, and call-making.  He could hardly believe it!  I suppose that his reaction wasn’t overly-surprising given his business model, which was almost identical to that of the advisor mentioned first in this post. This person’s business model was one of pure delegation of investment decision-making to outside parties.  I didn’t ask if that’s what his clients perceive his job to be (abdication), but I should have. 

What this second advisor said next took the proverbial cake.  This was weird.  After finally accepting the concept of us actually managing our clients’ portfolios, he suggested a ‘trial run’ to determine whether or not TrestleBridge Capital was the place for him.  Looking back on things, the fact that he felt that he was in a position to be suggesting anything at that juncture is beyond me and also beside the point.  I asked him what this ‘trial run’ would look like.  He suggested that he gather up a bunch of his well-to-do golfing friends and that I would host everyone at my golf club for a round.  Isn’t is easy to spend other people’s money?  He suggested that after the round I would get up and talk for 15 minutes about what TrestleBridge does, and if these golfing buddies felt that it was worthy, he would join our company as an advisor.  I asked him if these golfing buddies were already clients of his and he said that they were not.  He said something like ‘oh, well they don’t do business with me, but maybe they’ll do business with you’. 

Wow.  Where do I start?  First, how is it that a veteran advisor of 30 years isn’t confident enough to actually manage his clients’ money?  You would think that after 30 years you would have learned a thing or two that would enable you to ‘make a call’.  Second, it reeked of incompetence when this gentleman suggested that his friends do the due diligence (via a 15 minute presentation no less) on our investment programs rather than he himself.  Shouldn’t he be the most qualified amongst his group of friends to judge an investment strategy?  And lastly, it struck me as sad and amateurish that by setting up this little ‘golf followed by a dog and pony show’ event with his buddies, he was essentially telling his friends ‘I know that you guys don’t think that I know what I’m doing, but listen to these guys, they do.’

So what’s the point?  I found what transpired in these two, separate conversations to be noteworthy as a participant in my industry.  How can a financial advisor lack the confidence to manage his own money?  How can a 30 year industry veteran host an embarrassing event where a young buck like me builds credibility for him with his friends?  This all sounds funny, and it would be, if it weren’t true. The scary part for me is the fact that these two advisors have clients……….presumably A LOT of clients, and they’re currently in practice doling out advice on a daily basis.  I wrote a post a couple of weeks back entitled Financial Advisor Selection: The No B.S. Guide.  I guess this post represents a bit of a follow-up to that piece because I left the traits of “confidence and conviction” off of my list of things to look for in an advisor.   That was an oversight.  A financial advisor must be a leader, amongst other things, and while the traits of “confidence and conviction” don’t an advisor make, they do represent necessary qualities and a good start. 

When I got into the advisory business I was attracted to the idea of doing important work for people on important matters.  I’ve observed over the years that there are plenty of people in my industry that would be better suited for another career path.  These people either don’t put their clients’ interests first, lack competence, or just don’t have ‘it’.  This business is a tough gig and it’s certainly not for everyone.  Many employers hire young advisors on the basis of their personality alone as it can help to drive new business and revenues for a firm.  Being a good person with a great personality certainly helps to do the job, but that doesn’t make you a leader.  The markets can, and do call all of us out on the mat from time to time via drawdowns and bear markets.  I believe that it would behoove investors seeking advice, as well as employers within my industry looking to hire advisors, to think deeply about who it is that will represent them in the ‘ring’.  I’m not here to suggest the structure for a new ‘leadership test’, but someone should look into that for the general industry interview process.  Advisors lacking fortitude represent risk to their clients and the financial services industry as a whole.  While it’s the job of advisors to manage risk in clients’ portfolios, it should be the industry’s job to properly manage the risk of who they hire to work with clients.

 By: Andrew Gonski

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. There is no assurance that the techniques and strategies discussed will yield positive outcomes. 

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