Always Remember that Stock Brokers are Sales People First and Foremost
Avoid the Marketers and Financial Advisers
The most important thing I learned about the world of investing is that brokers are sales people. If you have not yet watched the Wolf of Wall Street, rent it today. It will open your eyes to what brokers really do. Their only mission in life is to get your money out of your pocket and into theirs. Now, to be sure, there are plenty of honest stockbrokers out there, but the firms they work for have only one mission and that is to get your money, all of it.
If you take nothing else from this article, please realize that stockbrokers are sales people. They earn their living by getting you to buy stocks. There earn a commission to push the stocks their companies have in their inventory. The more the inventory stinks, the higher the incentive to get rid of it.
Tony Robbins on Mastering Money
I am sick to death of losing my hard money and I’m betting you feel the same way. I’m reading Tony Robbins’ new book, “Money, Mastering the Game.” He confirmed many of the suspicions I always had about how the world of investing really works.
Tony is far from being a “man of the common people,” but claims to be watching out for us by learning from the rich and teaching to the poor. He is offering us some of the tips that separate winners from losers in the uncharted waters of the investment world. Investing is not for the faint of heart but there is no reason why we, as people who live in the greatest country on earth can’t learn how to hold on to and grow our personal nest egg.
The good news is most of the people he reached out to were willing to share their insights and Tony did a good job of recording it for our use. The challenge I have right now is sorting out the B.S. from the good stuff.
Goals of the Book
In preparation for his book, Tony interviewed most of the world’s richest and smartest people. He wanted to know how they got to where they are and how they manage to maintain their wealth during good times and bad. The most important point he discovered is that they know how to manage risk. They never go into a situation without a carefully planned exit strategy and they never invest in something they don’t understand.
He also learned that they carefully diversify their holdings to avoid being completely off the mark if a given market turns against them. They still look for home runs but are more than willing to keep hitting singles to maintain a good average over time. They may not get the best returns on a given play, but they avoid big losses and maintain a consistent strategy over time.
The most important lesson he offered however, is what I learned a long time ago. Repeat after me, he said, “financial advisers and stock brokers are sales people first and foremost.”
Speaking from Experience
I spent my career in sales so I know how it works. Sales people earn their living convincing others to buy things they need or want. Most investors want more money, so brokers are taught how to give us what we want and need.
Early in my investing life, I bought into the hype and believed the Madison Avenue marketing pitches about how brokerage companies wanted to help me grow my fortune. I signed on with several different companies who shall remain nameless but I believe it fits near all of them.
The first step they take you through is the exercise of designing your future. Painting an idyllic picture of what your life will be like when you reach your golden years. They pledge to help you get there. They ask what you what your appetite for risk is and act as if they really care about you. (Remember, they are sales people and I used to be in sales so I know how it works!)
My First Broker
My first broker was a golfing friend who worked for one of the biggest names on Wall Street. He convinced me to put all my money under his management and then proceeded to buy several stocks I had never heard anything about. I asked him what was going on and he assured me that his company knew what they were doing and it was a good move.
Six months later, my portfolio was down twenty percent and his income was about the same. He had all kinds of excuses but in the end, I lost money and he made money. That did not seem like a mutually beneficial relationship to me.
Broker Number Two
The second time around, I went with a former co-worker who I really trusted. He resigned from the company where we worked together and moved to another one of the big Wall Street Firms. He completed another investment analysis exercise, we talked about my risk portfolio, and he started making his moves.
This time, it took even less time for me to realize I had made another big mistake. Within months, my portfolio was dwindling while he was actively trading and running up commissions.
When I challenged him about it, he explained that in order to keep his job, he had to actively buy and sell positions. He could not just sit on my money. He had to “put it to work.”
Take this Lesson to Heart
The only person who really cares about your portfolio is you. Brokerage companies paint pretty pictures but in the end, they want your money, all of it. Yes, you have to use a broker to make trades for you, but don’t think for a minute they are your friend!