Wealth Management Unwrapped, Revised and Expanded. Beyer Charlotte B.

company. My entrepreneurial venture offered no product and sold no advice. I wanted to provide a safe harbor – an educational community for investors. The goal was to create a more informed consumer of financial services.

What I’ve learned – my unfinished business

      Over the course of my career, I have watched many investors make mistakes – and witnessed advisors hurting their businesses unwittingly by their own errors. I’ve also witnessed investors learning how to become more confident and make decisions that helped themselves and their families sleep better at night. Countless investors and advisors have confided1 in me, revealing how disappointed – or how thrilled – they were with one another.

      This book attempts to pull their stories together into practical lessons you can learn from, whether you are an investor or an advisor. That’s why there are two parts to this book: first, 14 chapters for the investor, and then the Appendix, which can be read from either the investor’s or advisor’s perspective.

      I’ve sat on both sides of the conference room table, both as an advisor and alongside an investor. To understand the thinking of both sides is important, and this book intends to show investors and advisors how to approach their relationships. The history of such relationships is littered with scandals like Bernie Madoff and Wall Street’s own focus on short-term profits. If we are ever going to change the way investors work with advisors and advisors work with investors, for the benefit of both, we need to expose myths, speak candidly about what goes wrong, and provide real solutions.

      That is my intention, and I hope you benefit from reading this book. Partnering is the ultimate goal, and the rewards are tangible.2

      CHAPTER 1

      Who’s in Charge of My Wealth, Inc.?

      Questions investors want to answer

      So, who is responsible?

      Is the customer always right?

      Who’s brave enough to tell a customer, “You’re wrong”?

      Something for nothing

      You’re the boss

      Free lunch, anyone?

      Be a partner, not a victim

      Wealth management is a business

       Overheard inside an online forum for investors:

      Investor #1: “Has anyone invested with Bernie Madoff? I have many friends and also know charitable organizations who invest with him. Thanks in advance for your view.”

      Investor #2: “My father invested with him a long time ago, and we are very happy. His returns are fantastic – our very best hedge fund!”

      Investor #3: “I know his reputation is earning great steady returns, but we just could not get comfortable with how he makes money, and thus we took a pass.”

      Eight years after that exchange online, I received a call from investor #1 thanking me. Bernie Madoff had been arrested three months earlier. This investor told me his ultimate decision not to invest was based on this dialogue. He knew he needed to look beyond one fellow member’s recommendation, and said he recalled part of due diligence was: “If it sounds too good to be true, it probably is!”

      But not every investor was as fortunate as this one. In fact, many very smart investors invested with Bernie Madoff because they thought they could rely on others to perform the basic due diligence. Now, you may be moaning out loud: “I don’t want to do due diligence!” Or: “I wouldn’t know where to start!”

      An unwillingness to learn something just because you don’t want to learn everything invites an unscrupulous salesperson to take advantage of you. Investors who abdicate responsibility for their own education will likely be bitterly disappointed. Think of all those stories we read about an elderly couple who lost everything by relying on their stockbroker, who advised them to make risky investments that became worthless.

      Imagine buying a new home without doing at least a little homework. Few would dare! When it comes to managing your wealth, you do need to do your homework. But I promise you that this homework is not the technical gobbledygook you might imagine. You can get an A in this class if you keep reading.

      You and those other investors don’t yet realize something important: You know more than you think you do. But first, you need to do a little homework – homework you already know by heart. It entails knowing yourself better and adding a dash of common sense.

      Because technical jargon has sometimes been used as a diversion (along with what appear to be wonderful returns), investors have given their life savings to people like Bernie Madoff. Compounding the problem is this: When it comes to your wealth, you and many other investors believe the investment professionals know best. The truth is often quite the opposite.

So, who is responsible?

       The professionals know only as much as you can tell them about your needs, desires, and tolerance for risk. Charley Ellis, author of the widely acclaimed book on investing, Winning the Loser’s Game, reminds you that you “own the central responsibility.. [which] cannot be delegated; it is your job, not theirs.”3 The good news is you can discover your needs, desires, and tolerance for risk – or find someone to help you learn what they are.

      Once you finish reading Wealth Management Unwrapped, not only will you be armed with answers to many questions – you’ll also know which questions to ask those who advise you on your wealth. What is your reward? You can truly begin to enjoy the present.

      So let’s begin with our discovery by asking an age‐old question.

Is the customer always right?

      You say you want the highest return without taking too much risk. You intend to find the “best” advisor. You expect your advisor to select the “best” money managers, hedge funds, or mutual funds, and to have access to the “best” investment products. You wish to have the “best” asset allocation for today’s market. You may even ask your advisor to tell you exactly what that allocation is at your very first meeting.

      Sadly, you are off to a stumbling start – and you won’t get very far. You may even hit a dead end.

      This dead end is fraught with rampant conflicts of interest. Advisors are eager to show off their various capabilities. They also have a bottom line and likely a new business goal. Salespeople may paint a beautiful picture of no risk or big rewards. Advertisements may promise you almost anything just to win your business. Investors are eager to find the “best in breed” but don’t want to pay “too much.” You may think you can rely on word of mouth or a golden reputation to point you to the best. Unfortunately, this is just not true. Both you and your advisors get hurt in the process.

Who’s brave enough to tell a customer, “You’re wrong”?

      The best advisors recognize you may not be right about everything, and will even dare to say it to your face! The very skilled ones will show you how and why you’re veering off into treacherous thinking, and you will feel grateful – not angry.

      • Instead of seeking the very highest return, you learn how to assess risk inside that breathtaking return.

      • Instead of asking who are the “best,” you learn how to discern who will work best with you.

      • Instead of insisting on “best in breed,” you learn the fallacy of that term. “Best in breed” is a powerful phrase in a sales brochure, but not a reality that stands the test of time.

      • Instead of placing yourself onto an assembly line that dispenses template advice, you learn to recognize those advisors who take the time to fully understand you and your goals.

      The lesson learned is that finding an advisor who will work well for you is not just a function of good chemistry, good friends’ recommendations, and good intuition.

Something for nothing

      Why

1

Throughout this book I have included verbatim comments from investors whose identities are kept confidential by request. Some are from inside the online community of IPI; others are from IPI programs or in conversations where investors or advisors relayed their stories. I have paraphrased certain comments to protect confidentiality.

2

Can advisors really help clients earn an added 3 percent? It seems so according to one study authored by Vanguard’s Fran Kinniry in 2014. Another study in 2017 by Russell Investments has claimed advisors can add value of 4 %. An excerpt from Kinniry’s paper: “This 3 % should not be viewed as an annual value‐add, but is likely to be intermittent: Some of the most significant opportunities to add value occur during periods of market duress or euphoria, when clients are tempted to abandon their well‐thought‐out investment plan.” Retrieved from www.financial‐planning.com/news/3‐advantage‐show‐clients‐what‐youre‐worth.

3

Winning the Loser’s Game illustrates how to be a better client and is now in its seventh printing.