In January, I made a tough decision
I chose to leave financial publishing after 16 years so that I could start a registered investment advisory firm. The past few months have been hectic — there’s been a lot to do and to learn. But, the No. 1 thing I’ve learned through it all is simple. Most investment advisers know zip about diversified investments outside the U.S. market.
I always believed this was true, mind you, but now I’ve confirmed it.
According to a recent interview, Corsair Capital's founder Jay Petschek did not plan to be a hedge fund manager. After holding various roles on Wall Street, Petschek decided to launch the fund in January 1991, when his family and friends were asking him to buy equities on their behalf. He realized the best structure for Read More
In order to make the jump into the world of professional wealth managers, getting a securities license is a must. When studying, it was clear in the curriculum that investments outside the U.S. — and any client who asks for them — are considered “weird” or “a huge hassle,” as my trainer put it.
My training to ensure I got my license was eye-opening. If you have money with an U.S. investment adviser, there is something you should know.
Investment Adviser – Trained Ignorance
Just because someone is a registered investment adviser, don’t assume they have any real qualifications to help you choose diversified investments. Yes, any good adviser worth his salt will know how to use bonds and U.S. equities to give you the right combination of income and growth. But if you want truly diversified investments with assets outside the dollar, don’t expect much.
Before I go further, let me be clear: I will be a fully registered investment adviser in less than a month. I have set up a firm that meets Federal and State requirements and has all the right licenses. Helping people grow and protect their wealth is my passion and I’m taking it to the next level now. I am not bashing investment advisers here, but rather sharing the industry bias that exists.
I had my pick of a dozen or more reputable online study programs designed to help folks pass the Series 65 — that’s the license you must have if you give personalized investment advice and get paid for it.
The exam’s purpose is not to qualify someone to make good investment decisions. Its purpose is to make sure you have a general knowledge of all types of investments, as well as very good knowledge of the government regulations. You must have working knowledge about bonds, equities, funds, options and economics.
When the trainer got to the section on international diversified investments, I became excited. Finally, it was something I know and love. He didn’t share my enthusiasm nor did many of my classmates. In fact, we spent a total of five minutes discussing international diversification and it started just like this…
In the rare event you get one of those clients who wants diversification outside the U.S., you can easily address that using ADRs traded here. Because you certainly aren’t going to want to buy stocks in foreign markets … no way. It’s a hassle. They are on a different time zone, you have to find a broker over there, then you don’t even know if they speak English, you have to deal with the currency conversation … it’s a mess. Don’t do it.
This comment was met with more than a few chuckles on the line. In hindsight, I should have spoken up, but I was caught so off guard by his remarks that I stayed silent. However, now I am not, and neither should you.
Find a Specialist
If you want to have diversified investments that aren’t tied to the dollar or to the U.S. markets, ask your money manager if they believe in diversification. Ask them to explain their answer. I bet everyone will say yes, but diversification will mean a mix of U.S. securities only.
Don’t give up hope. Some advisers choose to have specialties just like doctors. Some only deal with bonds and income while others are dedicated to growth stocks or IPOs. Some focus on global-investment strategies, which will give you exposure to the U.S. market as well as the best overseas. These global strategies can mirror traditional investment categories such as conservative, balanced or growth, but they’ll include investments or funds that include companies in some of the top markets.
If you are one of the people who want diversified investments out of the dollar, you aren’t weird, crazy or strange. You are smart … much smarter than the folks running the adviser training classes. Stay true to your investment goals and find an adviser who can get you there.
To good investing,
CEO, 1291 Group of the Americas
The 1291 Group of the Americas is an independent wealth advisory firm that specializes in tailor-made solutions that provide protection, tax efficiency, privacy, and investment diversification.