A Basic Tale
Donald Trump points the finger and says those words no one ever wants to hear, “You’re fired.” You are rejected. You are unworthy. There are others better than you. You don’t know what your next move will be.
What does this have to do with money? The answer is basic. You can’t fire yourself, so figure it out because you are responsible.
There is a motto conveying the core concept of personal financial responsibility. The motto was prominently displayed on a plaque on President Harry Truman’s desk while he occupied the White House. It read, “The Buck Stops Here.” The motto, or saying, derives from the slang expression “pass the buck,” which means passing the responsibility on to someone else. It is rumored that the expression originated with the game of poker in frontier days. During the course of play, a knife with a buckhorn handle would indicate whose turn it was to deal. If the player did not wish to deal, he could pass the responsibility by passing the “buck” to the next player. This concept of individual responsibility was so strong that President Truman even referred to it in his farewell address to the American people. He asserted, “The President—whoever he is—has to decide. He can’t “pass the buck” to anyone. No one else can do the deciding for him. That’s his job.” More recently, President George W. Bush said the same thing when he said, “I’m the Decider.”
When it comes to your money, your future, your portfolio and your investment success, just remember, you are “the decider.” You can’t “pass the buck.” The advisory industry will try to tell you otherwise, but they are self-serving. You are responsible. Never forget it!
This tale has one primary purpose and it’s to emphasize the concept that individuals are responsible for their financial lives. The concept of personal responsibility is an essential requirement for financial success. Until you take personal responsibility for producing more than you consume and taking the excess production and investing it wisely, you haven’t embraced financial success. You must “decide,” and the sooner you do, the better your chances. The buck stops with you, and your primary responsibility is the allocation of your capital, excess production or savings. Your job is to allocate this capital intelligently, and these tales will help you accomplish your goal. “The buck stops here” means you can delegate your responsibility but you can’t abdicate your responsibility. You must make decisions for yourself since you ultimately reap the rewards or suffer the consequences.
The purveyors of financial advice come in many forms and they lull you into a false sense of transference of personal responsibility. But as I said before, it is self-serving. Even if you hire someone to make all your investment decisions and consult with them on every minor financial decision that you may encounter, you are still making the decisions. You can seek input from others and you may delegate responsibility, but you are ultimately responsible. This may seem a cruel concept, but the sooner you accept this harsh reality, the sooner you can go about taking care of your financial well-being.
I originally started writing these tales for my four children. As a first-generation Cuban-American, I wanted to make sure that something had not been lost in translation from my parents, to me, to them. I watched as my parents welcomed dozens of families to live in our home as they made the journey from Cuba, where there was no hope or opportunity, and in many cases danger, to a world with a different language and culture, and yet the freedom to succeed. Interview these families or, for that matter, almost any Cuban-American family, and the concept of personal responsibility resounds. You will immediately hear how embedded the concept of individual responsibility is in our psyche and the essence of the Cuban-American success story in the United States. We were taught to make no excuses. We don’t believe in victimhood as a permanent state of awareness. We were taught to value education, to work hard, save, invest and to give back to the community. The Cuban-American experience shares the heritage that possessions can be taken away but knowledge can’t. You can take away our capital but you can’t take away our know-how. Know-how is capital. Much of what these tales cover I learned as a little boy, and this knowledge was reinforced as my education grew.
Accepting personal responsibility is a must. But that’s not enough. There is a second important criterion for financial success. It is the concept of advocacy or advisory. An advocate is one who speaks or acts on behalf of another. An advisor is someone that gives advice. In the financial services world, advocacy and advice often come in the same package because many advisors have the authority to make transactions for their clients. This authority is discretion and is an industry term. If someone grants someone else the authority to place trades in their account, they grant them discretion. Anyone can clearly see you should never—and I repeat never—grant discretion to an advocate/advisor who charges you on a transactional basis. If you do, you are essentially giving them a license to steal. They will “transact” you to the poor house. Only grant discretion to advocates/advisors who charge an hourly rate, a fixed fee or a percentage of assets under management. In fact, only grant discretion to a Registered Investment Advisor.
It’s important to know how to work with advisors, what motivates advisors, how to select advisors and how to distinguish wise advice from foolish advice. Every successful person I have met employs some combination of advisors and works intelligently with them. But they don’t delude themselves. They recognize they are ultimately responsible. If you are to be successful, you must understand and master the “how to work intelligently” with your advisors skill set.
The very fact that you are reading these tales says that you want to be more money savvy and this puts me temporarily in the position of advisor. You must develop a way to determine if the things I say or what others say ring true. Hopefully, after you have read these tales, you will be able to make proper distinctions and hopefully better decisions. But don’t forget the two basics. You are responsible and you must learn how to use advocates and advisors wisely.
Why is it so hard to work with advisors? Because either you have no idea what you are doing, or they have no idea what they are doing, or they have an idea of what they are doing but you don’t let them do it.
Implicit in the concept of an advisory relationship is the notion you lack some combination of knowledge, skill, ability, temperament, time or interest. You may prefer to hire someone to assist with investment and/or capital allocation decisions. Therefore, it is not a stretch to assume your advisor is an expert simply because they know more. They may know more, but chances are good they are not experts. Most alleged experts don’t know what they don’t know, or can’t render good advice due to conflicts of interest. These tales will help you recognize if your advisor has these traits. You will understand the various types of advisors and you will understand exactly what I mean by an expert. Needless to say, you will trust your advisor or you would never have hired them in the first place. But trust is not enough. They need to be good at what they do.
These tales also address an age-old dilemma people experience. This problem is the single most complicated financial decision you face. The dilemma is as follows: How do I hire and evaluate experts when I have limited expertise? How can I tell if people who call themselves “Experts” are who they say they are? Resolving this issue has been a challenge since the beginning of civilization.
Amongst other things, these tales will help you identify the type of experts—the unconflicted advisors—and will help you become a competent do-it-yourselfer (DIY). Your alternatives are few. You can hire a competent advisor, an incompetent advisor, or you can manage your own finances either competently or incompetently. Because the vast majority of people can’t afford a competent advisor and couldn’t identify one if they could, the only way to solve this puzzle is to develop competency. I believe you are better off as a DIY, even if you currently lack competency, than working with an incompetent or conflicted advisor. If you follow this path, you will eventually accumulate sufficient capital and knowledge to establish a mutually beneficial relationship with an expert advisor. When you do, you should be able to recognize what one looks like.
Let’s say you are working with an expert advisor. Are you home free? The answer is no. Just because you work with an expert advisor doesn’t mean you are not responsible. You are just as responsible as if you were to make all your financial decisions. There are those that disagree with this concept. They are wrong. I urge you to remember the words of Donald Trump, “You’re fired.” When you can fire or dismiss an advisor, even an expert advisor, at any time and for any reason, you are ultimately in control. If you can fire someone, you are in charge. As further proof, you can’t fire yourself, so get comfortable with the idea that you can’t “pass the buck.”