I am a fiduciary in my work that I do for my clients. I am also the largest investor in my own strategies, promising to keep a minimum of 80% of my liquid net worth in my strategies, and 50% of my total net worth in them (including my house, etc.).
I believe in eating my own cooking. I also believe in treating my clients well. I’ve treated part of this in an earlier post called It’s Their Money, where I describe how I try to give exiting clients a pleasant time on the way out. For existing clients, I will also help them with situations where others are managing the money at no charge, no payment from another party, and no request that I manage any of those assets. I do that because I want them to be treated well by me, and I know that getting good advice is hard. As I wrote in a prior article The Problem of Small Accounts:
We all want financial advice. Good advice. And we want it for free. That’s why we come to the Aleph Blog, where advice is regularly dispensed, and at no cost.
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But… I can’t be personal, and give you advice that is tailored to your situation. And in my writing here, much as I try to be highly honest, I am not acting as a fiduciary, even though I still make my writings hold to such a standard.
Ugh. Here’s the problem. Good advice costs money. Really good advice costs a lot of money, and is worth it, if you have enough money to spread the cost over.
But when you have a small account, you have a problem in getting advice. There is no way for someone who is fiduciary (like me) to make money addressing your concerns. That is why I have a high minimum for investing: $100,000. With that, I can spend time on clients, even helping them with assets from which I make no money.
What extra things have I done for clients over time? I have:
- Analyzed asset allocations.
- Analyzed the performance of other managers.
- Advised on changing jobs, negotiating salary, etc.
- Explained the good and bad points of certain insurance companies and their policies, and suggested alternatives.
- Analyzed chunky assets that they own elsewhere, aiding them in whether they keep, sell, or sell part of the asset.
- Analyzed a variety of funky and normal investment strategies.
- Advised on buying a building, and future business plans.
- Told a client he was better off reinvesting the slack funds in his business that needed financing, rather than borrow and invest the funds with me.
- Told a client to stop sending me money, and pay down his mortgage. (He has since resumed sending money, but he is now debt-free.)
I take the fiduciary side of this seriously, and will tell clients that want to put a lot of their money in my stock strategy that they need less risk, and should put funds in my bond strategy, where I earn less.
I’ve got a lot already. I don’t need to feather my nest at the expense of the best interests of my clients.
Over the last six years, around half of my clients have availed themselves of this help. If you’ve read Aleph Blog for awhile, you know that I have analyzed a wide number of things. Helping my clients also sharpens me for understanding the market as a whole, because issues come into focus when the situation of a family makes them concrete.
So informally, I am more than an “investments only” RIA [Registered Investment Advisor], but I only earn money off of my investment fees, and no other way. Personally, I think that other “investments only” RIAs would mutually benefit their clients if they did this as well — it would help them understand the struggles that they go through, and inform their view of the economy.
Thus I say to my competitors: do you want to justify your fees? This is a way to do it; perhaps you should consider it.
Having some people in an “investment only” shop that understand the basic questions that most clients face also has some crossover advantages when it comes to understanding financial companies, and different places that institutional money gets managed. It gives you a better idea of the investment ecosystem that you live and work in.