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From Mark Ford, editor, Creating Wealth: Some time ago, I discovered—very much to my surprise—my broker at Raymond James was “no longer with the company.”
It miffed me a bit that I wasn’t contacted right away. Among other reasons, I had open trades that needed managing. What if something fell through the cracks?
A few days later, I had a meeting in my office with the branch manager and a young man who was to be my old broker’s replacement.
They apologized for not notifying me immediately, explaining the situation was “difficult and personal,” and then they proved to me that my account was being tended to properly.
That was half of the reason for their visit. The other half was to convince me to keep my money with them.
Investment firms generally prohibit their agents from trying to take their “books” of clients with them when they move to other firms. But it’s difficult to do that, for reasons I don’t need to bother you with here.
When a top-earning broker leaves, a turf war begins. The broker and the firm begin a mating ritual with the broker’s best clients, starting with the “whales.” The goal is to grab or retain as many of the big fish as they can.
I knew that. And I knew my old broker would soon be asking for a meeting to make his pitch. And several days later, he did.
But when he did, I refused the meeting. I told him I was sticking with Raymond James and going to employ his replacement.
Why I did that is the subject of this essay.
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My broker is a bright man. He knows the markets. He understands the game. And as a top earner in his office, he was indisputably a good salesman. But what’s more important is I trusted him to do a good job.
Because of that trust, I mentioned him in an essay I did on municipal bonds. That mention brought him millions of dollars’ worth of business. He was happy to get that business and told me so. I told him, “Just take good care of my readers.” I believe he did.
But there was one little thing about him that always irked me. He had a tendency to talk when I wanted him to listen.
I’d call him up to ask a specific question about some of my bonds. His answers would come in a staccato tempo full of terminology I didn’t fully understand.
When I’d attempt to interrupt him for clarification, he would talk over me. I don’t know why he did that. It was a habit he couldn’t break, even when I spoke to him about it. It was disconcerting, but it wasn’t a huge problem.
I believed he had my best interests at heart, and he was producing good results. So I let it slide.
But one day, I received a notice saying I had bought shares of Facebook’s initial public offering (IPO). I was shocked. Facebook is exactly the kind of company I would never buy. Why had he done this? I called him up to ask why.
He told me my son, who also had an account with him, had requested he buy some for him. It wasn’t easy to buy Facebook’s IPO at the time. But he gave some to my son, and he also gave some to me. He thought he was doing me a favor.
That really shook me. On one hand, I realized he was trying to do me a favor. On the other hand, I wondered how he could possibly think I’d ever want to own a stock that had a P/E ratio of 99.
There could be only one answer. For all his many good qualities—and they were numerous—he wasn’t a good listener, and he hadn’t really listened well to me. He didn’t understand I wasn’t a speculator. He never fully understood my antipathy toward risk.
I don’t want to overstate this. I never felt—nor do I feel now—my broker was in any way irresponsible or untrustworthy. I give him good scores on both counts. He’s smart and earnestly does his best to give his clients good returns.
But his poor listening skills were a problem for two reasons:
- He wasn’t good at teaching me about the technical side of investing because he didn’t listen to my questions.
- He never understood my core investing philosophy—the principles I live by because they have worked so well for me in my wealth-building career.
Those thoughts were in the back of my mind when I met Dominick, the young man who was going to start managing my account “if” I decided to leave it with Raymond James.
After the introductions and pleasantries, the manager presented Dominick’s credentials—which were solid—and recommended his character and so on.
I was a bit worried about his youth. He looked to be in his early to mid-30s. But my worries were diminished almost entirely when he began speaking.
The first thing he said to me was something like, “Mr. Ford, I’ve been studying your accounts and their history. I know where your portfolio is right now. What I’d like to know is where you want to go with it. And what else I could do to make you happy with me as your broker.”
Wow! That was a very good opening. He was young, but he was saying all the right things. He had the initiative to study my accounts before we met… and he had no intention of telling me what to do.
He wanted me to tell him how he could help me.
This, in my view, is the right way to relate to your broker. Having any other sort of relationship is unhealthy and potentially dangerous to your wealth. You are the owner of your wealth, not your broker. You pay him. He works for you. You are his boss. He should treat you like his boss.
You may be thinking, “Gee, I don’t think I want to be my broker’s boss. He’s the guy who knows about investing. I don’t know enough to tell him what to do. And I certainly don’t want to insult him by bossing him around when he knows (and I know) I don’t know what I’m doing.”
Do you ever have such thoughts about your broker? If so, you need to change things. And quick.
It doesn’t matter that you know less about stocks and bonds than he does. It doesn’t matter that you feel like a small fry because you don’t have $10 million in your account. It doesn’t matter if all your questions feel “stupid.”
If you aren’t the boss of the relationship, you’re in trouble.
I answered Dominick’s very good questions by explaining my ideas about wealth building to him and even handing him a stack of my published books about business and wealth building.
In the weeks that followed, he was in touch with me at least twice a week.
We reviewed my entire portfolio, made key changes to restructure it in accordance with my asset allocation preferences, and agreed on buying and selling parameters so we could work more fluently in the future.
I’m very happy with everything he’s done. And what makes me most happy is he’s working for me… not the other way around.
Even after so many years of being in the financial information business, yet making a lot of money by ignoring industry conventions, I still find myself deferring to brokers when they start pitching investment ideas. I shouldn’t, but I sometimes do.
And if I sometimes do, I can only imagine the pressure someone else—who hasn’t had my experience or success—must feel when being pitched.
If you’ve ever felt like that, this story was for you. Don’t beat yourself up about it.
Remember, you don’t have to be an investment expert to be a successful broker. You simply have to be a persuasive talker. Brokers are professional persuaders. You should think of them that way.
If they can talk you into a submissive attitude, it makes their job (selling you) that much easier. If you defer to them the way I did with my old broker—even if it’s only out of politeness—you’re at a potentially dangerous place.
You might be talked into making a hasty decision you’d later regret.
What I’m saying is you should never, ever allow a broker to be in charge of the conversation. You’re the boss. He should listen to you.
Now, this may seem like a difficult thing to do when you feel like you don’t know what to do. But isn’t that why you subscribe to newsletters? You’re paying us to tell you what to do.
You shouldn’t let brokers give you investment ideas. That’s our job. As newsletter writers, we spend a lot of time and money coming up with the recommendations you’re getting in all of our various investment portfolios.
You have, with us, more good ideas than you probably can use.
Use your broker to execute trades… or to help you solve technical problems… or to answer specific, technical questions. Make sure he is listening to you—not the other way around.