Wall Street Shares Blame

• Time Magazine had a recent cover piece on why Main Street hates Wall Street. This certainly didn't take too much research since more than a few brokers are not too thrilled with the past and current shenanigans of certain banks, brokerage firms and government officials. Let's face it, writing about the poor relationship between Wall Street and the rest of the world is as easy as explaining why California hates Detroit. But it's wrong. The scribblers paint with a wide brush and not everyone in the business is culpable.

  This is like assuming every broker, planner or advisor is a Bernie Madoff. While its easy to blame someone else a lot of times people need to be responsible for their own investment actions. They lose money because they don't know what they're doing or place their trust with people that have no business investing other people's money.

  Let me share some of my experiences with you. One of my current best clients came to me because his neighbor moved. I am not making this up.

  When I first met Tom and his wife it was the mid0-90s and they had a tech-Internet heavy portfolio that when I met them they wouldn't let loose of until someone pried it from their cold...well, you know the phrase and then one day I got the phone call because as Tom explained, their next door neighbor moved and the neighbor had been giving Tom tips on what dot com junk to buy and sell. The neighbor sold aluminum siding or something for a living and was simply following the herd in his dot com recommendations and sharing his world of knowledge with Tom. What did the neighbor care what he told poor Tom what to buy and sell, it wasn't like it was his money to lose after all. When Tom and his wife discovered exactly what they owned and the risk they were taking with all their retirement money it was easy to convince them to move to safer more stable investments.

  Or, how about this one -Years ago I held a seminar and after the meeting a woman approached me with a huge welcome home, sailor, smile on her face, and told me she was planning on getting into the business (the investment business, dear reader) and she was going to do it as soon as she retired and offer her services to her friends and neighbors. I am really very good at picking solid investments, she boasted, showing me some top notch dental work. 'Really," I said, "who do you follow?' She gave me a blank look and finally after what must have been a full minute turned a lovely pink and said, 'I read Money Magazine.'

  And a few weeks back a senior client who has been with me for 15 years fired me because their 40-year old son had suddenly morphed into a financial genius, graduating from tightening bolts on stuff for a living, and was taking over their retirement plan investments. He helped pick our Medicare insurance,' the wife almost in tears told me as they were leaving. (That's a qualifier, huh?) Can anyone spell future disaster?

  Then there was, many years ago, a woman I was referred to who showed me some fancy annuity brochures and paperwork on several limited partnerships she had invested in. It was all the money she had in the world. I asked who was her broker and she told me it was a Detroit fireman who moonlighted as a broker. Ah ha! Which wasn't as bad as the school teacher who gave $100,000 to a fast food manager to invest for her. He too was moonlighting in the investment business.

  Finally there was the lady I had coffee with the other day who wanted me to be aggressive with her portfolio and buy Exchange Traded Funds. Why, I asked. 'People are getting rich buying ETFs,' she said. She had been an aggressive investor her entire financial life, she said, but lost big when the dot com bubble burst and again in 2008. But this time she knew it was different. When I asked he what she knew about ETFs she was stumped and didn't know the first thing except buy and hold was dead. The sad fact is someone will find her and take whatever is left of her retirement fund.

  So there are just a few examples of poor judgement and people who could blame Wall Street but Wall Street had as much to do with their losing money as I have qualifying for the next Olympics. Here's a few tips for finding someone qualified to help you:

  Make sure they work full time in the investment business and have a series 7 license to sell all products not just insurance and mutual funds.

  They carry Errors and Omission insurance and make them show you the certificate. Lots of people lie, unfortunately.

  You never write checks payable to the broker no matter what they say.

  Never simply buy a product, invest for the long term with a plan. Preferably it's a plan that you articulate not what they say you should buy.

  Finally, don't do business with someone that obviously makes less money then you do. Let the new brokers practice losing money on someone else.