The Ego, The Market, and The Mania

Recently one of our prospective asked me to delineate exactly what being a financial planner entails.  I sent him a long description along with a detailed matrix of our various services which gives a good itemized and technical explanation of what we do.

Shortly thereafter my mind wandered off to a song I heard many years ago by Frank Sinatra entitled That’s Life. It’s a great song and one of my favorite sections are the lyrics that go something like this:

“I’ve been a puppet, a pirate, a pauper, a poet, a pawn and a  King…”

It’s wonderful to think that you can live a life continually playing different roles.

I started thinking about all of the skill sets involved in being a financial planner and investment advisor such as gathering data, establishing goals, analyzing information, making and implementing recommendations, and monitoring performance.

And I realized why this is such a great job; it has so many fascinating aspects that allow one to tap into the aptitudes of so many other professions.

Officially we work as investment advisers and financial planners, but metaphorically we are the financial equivalents of fishing guides, architects, actuaries, bodyguards, futurists, pilots, physicians, psychologists, psychoanalysts, quarterbacks, social workers, professors, and sometimes even priests! Hopefully, we never have to play the role of undertaker.

I wonder how I can fit all of that on my next business card!

There’s something wonderful and mysterious about the Latin language.  After all it’s the ancestor of all the romance languages and whether we know it or not we are using its linguistic descendents every day in our verbal expressions.

When I was studying for my Series 65 test to become an Investment Advisor , I was introduced to the term” fiduciary” (in fact you’d have a difficult time passing the Series 65 without fully understanding this term). It’s a beautiful, eloquent, polysyllabic word. But what does it really mean? It comes from the Latin word fīdūciārius – from fīdūcia trust – and means that you are legally agreeing to stand and act in a special relation of trust, confidence, or responsibility regarding financial matters on behalf of the party that you serve.

It means above all, that you place the financial and personal interests of the client that you serve, above your own personal interests. It means that you refrain from any obvious conflicts of interest and that you disclose any possible conflict of interest and that all of your actions, motives, and recommendations with respect to your client are honest, forthright, transparent, open and ‘above board.’ It’s a wonderful way to do business.

So what’s the Latin opposite of this?

I would suggest it is Caveat Emptor or “Let the Buyer Beware.” This phrase comes from caveat – the third person singular, present subjunctive of cavēre – to beware, and from ēmptor – or buyer.

Unfortunately, this is the way most business is conducted. It is the axiom or principle in commerce that the buyer alone is responsible for assessing the quality of a purchase before buying.

As an example, just recently I was checking out a martial arts course that I had some interest in. I went to a free introductory lesson which I enjoyed, and I was prepared to pay by check for and choose a sign up option giving me one free month of lessons and one paid month of lessons. However I was taken aback by a very complicated contractual document that I was asked to sign which required me to sign up via credit card or with a direct deposit from my checking account and with all kinds of hidden clauses and legalese verbiage that obligated me to pay a $50 discontinuation fee, that required me to give at least 30 days written notice by certified mail only in order for me to discontinue the course, that gave the owners of the martial arts course the ultimate authority to decide whether or not I had the right to discontinue the course etc. Ultimately I declined to sign the contract.

Unfortunately Caveat Emptor transactions are most commonly found in our society and many people have been badly burned by them. We at Gold Medal Waters feel that it is especially important for you the client to always know which of these two Latin relationships you are getting yourselves into especially when it comes to investment services and the large financial/wealth management and investment decisions that can directly and profoundly affect you and your family’s financial future.  As a fee only financial planner we take a strict fiduciary pledge on all of our client relationships.  This Is a Very Big Deal.

The majority of stock brokerage services do not sign any sort of fiduciary pledge. The majority of firms that sell you annuities, insurance products, hedge funds, loaded mutual funds, variable life insurance, credit cards, used cars, used trucks, and aluminum siding for your house are generally in the domain of Caveat Emptor.

Wouldn’t it be great if all of our relationships/transactions were at the level of a fiduciary trust?  It would mean that we all act from an ethical imperative of honesty, transparency, and always acting in the best interest of the client/customer/patient. Wouldn’t it be awesome if we could operate in a society that followed the Golden rule variation of philosopher R D Laing- “Do unto others as you would have others do unto you, if you were in the other person’s position.” Or the moral philosophy of Immanuel Kant “there is one categorical imperative. Act so that every action of yours should be capable of becoming a universal rule for action for all men”.

Hopefully that time will someday come. In the meantime find a good fiduciary or Caveat  Emptor!