34 years ago next month, I began my career in the financial/investment advisory field, starting out as a broker with Bache, Halsey, Stuart & Shields. There have been many lessons learned over these years, but here are three that stand out.
1. Conflicts of Interest and their Costs Matter.
When I left Bache in February 1982 to form the first Fee-Only financial planning firm in S.C., I thought the days of investors relying on sales driven “advice” from brokers were surely on the wane. While there are indeed more investors utilizing advisors today, the legacy investment firms, (mostly brokers and insurance firms), have managed to keep many investors within their fold. This, despite the inherent conflicts they have by peddling “advice” as an incidental element of products usually loaded with poorly disclosed costs.
2. Economics Wins…The Market Wins.
In the short run, the economy and the stock market are often not in sync with one another. In the long run, however, economic growth and corporate earnings growth are related. In the period of time I have worked in this field, there have been 6 different Presidents; seven recessions; dozens of natural disasters; financial meltdowns; Y2k; 9/11 and on and on. Yet, through all this the S&P 500 has risen from about 300 (in 1979) to 1600 today, more than a five-fold increase or about 11% per year. After inflation adjustments, that still works out to better than 7.5% per year. To the extent we can all keep our gaze on the long term, the details tend to work themselves out.
3. Our own Choices; Our own Behavior Matters Most.
It was common in the early days of financial planning to see written plans that were literally hundreds of pages long delivered in big binders. To a large extent, I think this allowed investors to boast that they had a detailed financial plan, while not changing anything or making hard choices. Financial planning works within the framework of economics and trade-offs…choices are an integral part. Establishing priorities and consistently saving are two choices that are necessary but difficult for many. What you make is not nearly as important as what you save.
Attaining and maintaining financial independence isn’t all that hard but these simple lessons can’t be ignored. Our firm is dedicated to making all of these factors work for you. We align our interests with yours; we keep our focus on the long-term market momentum and not the short term noise; and we help establish a goals driven decision making framework. Please let us know how we can be of assistance.