Big Mistake Insurance

Sometimes the biggest value we provide clients doesn’t involve ‘making money’.
The $650,000 Mistake !!!

Oftentimes the biggest benefit clients get from us is what I call “Big Mistake Insurance”.

Below are parts of an E mail I received from a ‘past’ client. They were comfortable handling their own investments & just didn’t see the value in paying someone like us. For the past couple of years they’ve lived full time in their RV.

As you’ll see, we left on good terms. I’ll let you be the judge as to how much money they ‘saved’ by ‘firing’ us.

Hi Brian,

Bunny and I have finally settled into a house in Florida again. This time we are on the west cost just north of the Clearwater/Tampa area. We have all the furniture and boxes we stored in Merritt Island before we left on our Motor Coach trip around the country.

We do still have the motorhome and plan to go traveling in it for a month or two at a time, but that will probably not happen before sometime in 2007.

Yes, I know the question you are asking in your head as you read this.

Yes, we got whopped by the WorldCom Bankruptcy.

And yes, I admit my mistake by not listening to you that we should get rid of some of that stock.

I only sold the stock we had in Bunny’s IRAs to avoid paying capital gains taxes in the non-retirement accounts. Boy was I sorry I kept those shares. Luckily we at least sold a ton of shares we had in Bunny’s IRA.

We did, however, lose about $650,000. That was very hard to take, but we have recovered now and we have about $400,000 more than we did the last time you and I met in ……. So all was not lost. But we are still NOT back to our highest dollar amount that we had in ……..

The problem is we have a lot more debt now (another thing you advised us against that I did not listen to <big grin>) and we are at risk due to the fact that we have too many dollars in stocks (We own a portfolio of about 24 stocks, as of today).

I personally manage this portfolio, moving into new stocks and out of old ones by identifying the stocks I should buy and those I should sell via my stock screening strategy and then doing further due diligence on the stocks that pass the screen. The strategy I use now is the same (with some refinements) as the one I used before when we were your client. It has served us well by more than doubling our liquid assets since August, 2002.

So you ask “If you are doing so well why are you contacting me?” <Big Grin>.

Well, I will always dabble in the market because I enjoy it, but I don’t want to dabble with our entire nest egg. And we are both too old now to take the risk of this much dependence on the equity markets.. Its got us back up financially where we are now, but it’s time to reduce the risk.

Also, this is getting to be too much like a full time job! Bunny and I want to enjoy the years we have left. So, I have decided it is time to do two things and I want to come over to your office to get your thoughts on how we do these two things. It looks like I am about two hours driving time to your offices. I could be there almost any day this week if you are available. I will come prepared with the financial data for you to see where (what kind of accounts) the money is and what form it is in.

Best regards,
Al

Here’s my observations from this. Lessons we can all learn from:

While some may complain about our fee, I can assure you, no ones ever paid us $650,000! (though arrangements can be made if you insist!)
So, it actually ended up costing him more NOT using us. I urged him to consider our fee an insurance premium for “Big Mistake Insurance’. Just couldn’t convince him he’d ever ‘collect’ on his policy. Now he knows better. Too bad it’s too late.
Notice he has an investment ‘system’ that he’s put in writing and follows. The true sign of a successful investor. If you’re handling your own investments without a written ‘system’ to follow, you’re a train wreck waiting to happen.
Even though handling their investments is ‘enjoyable’, it’s now starting to feel like a ‘job’. I bet the same would happen to the golfer who could play every day. Pretty soon what was fun & enjoyable turns into ‘a job’.
Looks like they’re finally starting to ‘see’ why I push so hard to be ‘debt free’ at or before retirement. Too bad they had to learn from ‘the school of hard knocks’ rather than choosing to benefit from our ‘experience’.
Notice how he’s willing to drive 2 hours (one way) just to see me. From experience, he knows it’ll be time well invested on his part.

(Yes, I’ve changed names etc to protect their confidentiality. We never share confidential information with anyone. The numbers however are very real!)