Traps of Treasure

Louis Scherschel

• Publisher: Covenant Books, Inc.
• Year: 2021
• ISBN:
  9781638146018
• Topic: Negocios y empresa
• Subtopic: Gestión del patrimonio

Everywhere you look today, it seems a new commercial, social media article, or seminar claims its methods or products provide the most efficient path to secure your financial future. Talking heads and squawk boxes on television seeking to enrich only themselves are a dime a dozen. Yet more than 95 percent of the general public are not fortunate to be born into the lap of luxury. Many still wonder how their decades-long hard work could ever truly lead to a financially stable life and retirement for themselves, their children, and their loved ones.

Traps of Treasure delves deep into the various ways financial industry players evade their moral obligation to fully disclose relevant information. By shining a light on many of these tactics, the book helps general retail investors make well-educated decisions for their future while investing. With the daily grind of life, it's no wonder it's so easy for major institutions and unscrupulous players of the financial industry to take advantage of retirees or investors. Jobs, school, medical emergencies, vacations, and caring for family members consume investors' time as they try to build a sustainable quality of life for themselves. Most people do not have the time in their daily lives to investigate with a fine-tooth comb the sleight of hand and immoral maneuvering that occurs as investors entrust their hard-earned money to a financial advisor or investment firm.

Traps of Treasure enlightens readers by guiding them through the pitfalls they might encounter along their path to a peaceful retirement and high quality of life. You may be a novice looking to establish your first savings account. Perhaps you are an experienced investor wondering why you have not made the progress you hoped to achieve when you started investing. The contents of this book may help uncover ways to protect you from the proverbial pool of sharks in the investment world.

Topics covered in this book include lesser-known operations in the back offices of large investment firms, media manipulation methods of retail investors, regulatory impediments to successful retail investing, and different structures of investment companies, to name a few. Traps of Treasure gives readers useful insight to detect and avoid the snares laid and evasive maneuvers used by the industry's less ethical members. With the help of an industry insider's firsthand experience, a retail investor might have a better opportunity to lay the foundation of a successful investment strategy.

In essence, this book tries to reduce an investor's odds of being taken advantage of by the many immoral tactics employed by those who are in the business solely for self-enrichment. Contrary to stereotypes portrayed in movies or caricatures of greedy investment managers, it is possible to find financial advisors and investment firms who truly want to help others enrich their lives and protect their financial futures. The trick is recognizing which ones can directly, morally, and satisfactorily answer the questions and topics raised in this book.

Chapter 9

Incorruptible
Summary Points for Diving into Wealth Management

Now that we have looked at many of the pitfalls and traps a new investor can encounter when delving into wealth management, we can outline a basic approach plan. Part of this book’s intent is to help you create an incorruptible and inviolable method to reach your financial dreams. If you have never worked with a financial advisor, insurance agent, or wealth manager, here is a simple breakdown of steps to start a conversation based on topics discussed in this book.

This road map can narrow down your questions and enlighten your path. It can help you decide which professional suits your personality and give you a sense of who may be a good fit to serve your needs. Even if you are experienced or already work with a financial advisor, the following steps may remind you of questions to raise with your advisor. They may need review, given the relationship’s passage of time. After all, relationships change and mature through time. They are not static. Reassessing relationships every once in a while helps focus on areas for improvement for everyone involved.

A Good Starting Point

Beginning down your road to financial security, consider using the following outline to guide you:

1. Firm structure and manager type: Perform your initial research on what firm structure you prefer and which financial advisor will suit your temperament and imminent financial needs. The structure may take the form of a sole independent financial advisor specializing in one account or product type. Maybe the more appropriate structure may be a large wire house that handles multiple complex products for business dealings. Once the firm structure is selected, assess which financial advisor function you prefer. Choose whether you want an advisor who handles all the miniscule trading details and account allocation. Or if you prefer, choose an advisor who is more adept at building professional relationships. A relationship-building advisor will likely outsource day-to-day portfolio management functions to third parties and back-office support.
2. Broker transitions, retention, and protocols: Investigate how many times a financial advisor transitioned to other firms. Similarly, investigate if the firm you consider holding your assets with has a pattern of moving new brokers in and out the door quickly. You will also want to clarify the freedoms the investment firm will afford your financial advisor should the advisor choose to leave the firm. Each of these considerations can mitigate potential future disruptions to your portfolio management.
3. Moral obligations and duties: Make clear during your initial discussions with a potential advisor or firm in which capacity they will serve you. Will they serve you as fiduciaries by putting your interests first before theirs? Or will they simply function as a broker, finding you suitable investing products? Then decide how much control you wish for an advisor to have over your accounts. Do you want to allow them discretion? Or do you prefer to call more of the shots yourself where trading and account decisions are concerned?
4. Management styles: Perform background research for yourself and discuss with your advisor whether you desire an active or passive approach to managing your account allocations. Likewise, ask the advisor about his overall philosophy toward managing. Does he prefer a technical and chart-oriented approach? Or does he prefer to assess the investing public’s sentiments during different times in economic cycles? Also discuss the potential array of financial products and securities that could be made available to you.
5. Reputation: Verify if there have been any significant claims filed against the financial advisor or firm with which you intend to do business. Bear in mind though that the wealth management profession is rife with fraudulent, slanderous, libelous, and unsubstantiated claims against advisors and firms. The negative press you see at any given moment may not necessarily be true. You will have to dig a little deeper into circumstances of potential concern to see if they materially matter. Also ask your financial advisor about his communication approach and frequency with you.
6. Research and resources: Inquire of your financial advisor about his preferred data and research sources to make decisions. Specifically ask him about his methodology to avoid herd mentality regarding hot ticket securities that the media promotes with pump-and-dump schemes. You will want to ensure your advisor’s view toward trading is stable and not susceptible to fleeting cultural market whims.
7. Realistic wealth expectations: Speak with your advisor at the outset of your relationship to have him quantify realistic expectations for your future wealth and retirement accounts. This will be based on your current income, accumulated assets, time horizon, and many other factors. As a client, come to the relationship with a clear mind purged of lavish excess propagated by media or advertising. The only assets and goals of consequence are the finite and achievable ones you can reasonably expect to reach over the course of your life.
8. Stable targets: Keep an eye out through the years that advisors, fund managers, and firms do not try to change the game by swapping out methods or products you have successfully used for many years. The markets will always change over the course of your life. But you want to ensure a competent understanding of current events or theories that dictate the necessary response to such change. Beware of a firm’s, fund’s, or advisor’s motivation to simply make more commission.
9. Security and privacy: Last, be sure to inquire of both the firm’s and financial advisor’s security protocols. This should be addressed from both a technology standpoint and governmental agencies standpoint. For any advisor or firm you speak with, request their disclosure brochures and their ADVs.

Minimum Expectations of Privacy and Account Security

I will offer one last remark entailing expectations an investor should have regarding personal privacy and account security. Regarding account security, almost every firm provides adequate backup systems and malware safeguards to protect your information and to ensure account integrity. Breaches of security can be rare. But when they do occur, they receive outsized attention in the media relative to how often it actually happens. As some basic guidelines for your accounts’ security and personal identity protections, here are a few thoughts to consider.

Most firms will provide a direct statement as part of their regulatory disclosures. The statement addresses client privacy and how they approach it. Usually, their statements may sound something like the following:

Client privacy

At our firm, we believe that privacy is of central importance to our relationship...