Tools versus Carpentry

Tools versus Carpentry

Yesterday, I bought a router.  I’m not sure what a router does, but I read in a magazine that every home workshop should have one.  So I went to Home Depot and a “Certified Specialist” helped me pick out the best one.  When I got home, I discovered that I really needed a jigsaw.

Not that I blame the Home Depot salesman.  He is a tool salesman and he sold me a tool.  He did not call himself a carpenter, and I did not expect him to build my house.  Not every profession is so straight-forward.

Apparently salesmen no longer exist in the financial services industry.  My insurance agent is a Certified Retirement Specialist.  My accountant is a wealth manager.  Actually, several realtor friends are now wealth managers. The bank teller insists upon referring me to their investment advisor.  Trusted advisors offering comprehensive solutions.  Except every solution involves the exclusive purchase of their product.

The securities industry creates this illusion because most clients will no longer hire a salesman.  But they will hire an advisor.

A few facts worth noting:

• Anyone with a securities license is legally defined as a salesman.
• A licensed salesman is employed by a securities broker/dealer (regardless whether they call themselves “independent”).  There is a sales manager.  There are sales quotas.  The broker/dealer determines what can and cannot be sold to investors.  In fact, the broker/dealer permits the salesman as little discretion as possible.  Why?  Because the broker/dealer is liable for the “advice” of the salesman.
• Salesmen, and their firms, have only two goals.  Earn a commission.  Do not get sued. Regulators require all investments to be “suitable” for the client.  So the salesman will require new clients to sign a document describing their goals and objectives. And if the client loses money and attempts to complain, that trusted advisor will bring forth the signed document and claim he is just a salesman following orders.  And win in court.
• Salesmen are your trusted advisor… until it’s time to actually offer advice.  And then they will expressly NOT offer advice.  They will offer a selection of their firm’s “packaged products” (the actual name given to mutual funds, etc.).  Because no one can predict the markets.  My god, that’s market timing.  How can anyone know such a thing?  You are wiser.  A long-term investor (which I submit is the greatest legal defense strategy ever devised.  If you ever lose money, it’s your own fault.  You didn’t wait long enough).  The basket of packaged products invariably represents an extremely expensive form of indexing.  Something any investor can do on their own.  For free.

Just my opinion.  Of course, I could be wrong.