Straight Talk from Al Jacobs

SORRY, NO SEMINARS

Not long ago I was asked whether, in addition to issuing articles on financial subjects, I also conduct investment seminars or private consultations. My reflexive response of “No!” wasn’t really very informative; the inquiry deserves a more extensive reply.

I’m in the investment business, not the investment advisory business. The activities I engage in are designed to generate a profit for me, as well as for my associates. Of course there’s nothing improper about this, despite the criticism from a variety of sources likening this attitude to greed or worse, Understandably this is what all businesses should do: make money for the operators of the business. And this is where dispensing investment advice becomes troubling, for seeking profit by advising others how to seek profit involves an inherent conflict of interest.

Consider the advisor who receives a commission for placing a client in a security. You should note there’s an orchestrated crusade by those who identify themselves as fiduciaries to do away with the commission-based practitioner. They contend the selection will not be based upon the soundness of the investment, but rather, the size of the commission. Perhaps this is so in many instances, but even fee-based advisors who receive no such commissions must resist other enticements, as when the advisor counsels a client to float a loan on their personal residence so more funds will be available to be placed with the advisor … I know of a prominent certified financial planner who does exactly this.

I contend an advisor’s recommendation which favors the client over the advisor constitutes an inherent contradiction of human nature. Under even the best of circumstances, any guidance will be colored by the benefit to the advisor. It’s a rare individual who will consistently place a client’s well-being before his or her own. It’s for this reason I choose not to involve myself in this fashion.

I’ll add a final thought to this controversy: In the investment advisory business, when the contest is between human nature and idealized devotion to virtue, human nature invariably wins out. Therefore, thanks for the invitation; though I admit it’s flattering, I’ll be conducting neither seminars nor private consultations.

Al Jacobs, a professional investor for nearly a half-

century, issues weekly financial articles in which he

shares his financial knowledge and experience.

You may view them on http://www.roadwaytoprosperity.com