”There is a difference between listening and waiting for your turn to speak.” – Simon Sinek

Why I Wasn’t “Loyal” to My Broker

I called my broker but was connected to someone I didn’t know. She told me my broker was “no longer with the company.”

“What does that mean?” I asked.

“He’s just not with us anymore.

“So why wasn’t I told?”

“We were just about to notify you.”

That concerned me. I had open trades that needed managing. What if something fell through the cracks?

A few days later, I was visited by the branch manager and a young man who was to be my old broker’s replacement. The manager apologized for not notifying me immediately, explaining that the situation was “difficult and personal,” and then assured me that my account was being tended to properly.

That was half the reason for their visit. The other half was to convince me to keep my money with them.

Investment firms generally prohibit their brokers from trying to take their “book” of clients with them when they move to another firm. But it’s hard to do that when the broker-client relationship is a longstanding and trusted one.

When a broker leaves a brokerage, the house initiates a “retention” protocol that involves routine efforts to persuade the broker’s clients to stay with the firm. But when a departed broker leaves a “book” of “whales,” the protocol is more like a cold war, with each side doing everything they can legally do to grab or retain as many of the big fish as they can.

I knew that. And I suspected that my broker had been legally restrained from contacting me while he was still with his old firm or shortly thereafter, which accounted for my being in the dark. I expected he would contact me soon, and about a week later he did.

But by that time, I had already decided to keep my money with the brokerage.

Why I did that is the subject of this essay.

My broker was a bright person. He knew the markets. He understood the game. And, as a top earner in his office, he had proven himself to be a superb salesman. But what was important to me was that I trusted him to do a good job. And that meant helping me make buy-and-sell decisions based on my insights and my temperament, not on his inclinations or the directions of the firm.

But there was one little thing about him that always irked me. He had a tendency to talk when I wanted him to listen.

I’d call him up to ask a specific question about some of my bonds. His answer would come in a rush of statements replete with data I could not verify and financial terminology I did not completely understand.

When I’d attempt to interrupt him for clarification, he would talk over me. He didn’t do it rudely. Had he been rude, I would have ended the relationship immediately. He seemed to be motivated more by his excitement about the investment. Every so often, I would ask him, politely, to slow down and listen to me. He’d apologize profusely, but it was a habit he couldn’t break. And it was annoying. But I wrote it off as a peccadillo.

I believed then and I still do that in his mind he had my best interests at heart. And since my accounts were growing at the time, he had good reason to feel that way.

But then one day I received a notice saying that I had bought shares of an IPO. It was a digital business that was all promise but no performance. Exactly the kind of company that, had he ever actually listened to me, he would know I would never buy. Why had he done this?

I called him, and he told me that my son, who also had an account with him, had asked him to buy some of the shares for him. It wasn’t easy to get shares of this company’s IPO at the time, but he gave some to my son and he gave some to me. He said he was doing me a favor.

I believed him. I was, after all, one of his bigger clients. If he had a stash of these hard-to-get shares, he’d be smart to distribute them to clients like me. But it bothered me that he had gone ahead, without asking me first, and spent my money on a business whose P/E ratio was about 100 to 1.

For all his many good qualities – and they were numerous – he wasn’t a good listener. And his poor listening skills were a problem for two reasons:

* He wasn’t good at teaching me about the technical side of investing because he didn’t listen to my questions.

* He never really understood my core investing philosophy – the principles I live by because they have worked so well for me in my wealth-building career.

Those thoughts were in the back of my mind when I was visited by the branch manager of the brokerage and the young man – Dominick – who was going to be handling my account “if” I decided to leave it with them.

After the introductions and pleasantries were over, the manager presented Dominick’s credentials, which were solid.

I was a bit worried about his youth. He looked to be in his early to mid thirties. But my worries were diminished almost entirely when he began speaking.

The first thing he said to me was something like, “Mr. Ford, I’ve been studying your accounts and their history. I know where your portfolio is right now. What I’d like to know is where you want to go with it. And what else I could do to make you happy with me as your broker.”

Wow! That was a very good opening. He was young but he was saying all the right things. He had the initiative to have studied my accounts before we met and he had no intention of telling me what to do. He wanted me to tell him how he could help me.

This, in my view, is the right relationship to have with your broker. You are the owner of your wealth, not your broker. You pay him. He works for you. You are his boss. He should treat you like his boss.

You may be thinking, “Gee, I don’t want to be my broker’s boss. He’s the guy that knows about investing. And he has much bigger clients than me. I certainly don’t want to insult him by bossing him around when he knows and I know that I don’t know what I’m doing.”

If that’s the way you think about your broker, you need to change things. And fast.

It doesn’t matter that you know less about stocks and bonds than he does. It doesn’t matter that you feel like a small fry because you don’t have 10 million bucks in your account. It doesn’t matter if all your questions feel “stupid.” If you aren’t the boss of that relationship, you are in trouble.

In the weeks that followed, Dominick was in touch with me at least twice a week.

We reviewed my entire portfolio, made key changes to restructure it in accordance with my asset allocation preferences, and agreed on buying and selling parameters so we could work more fluidly in the future.

As the months passed, I felt better and better about my decision to say goodbye to my old broker and work with Dominick. It wasn’t that I felt Dominick had better insights or even better intentions than my old broker. It was that he was going to let me be in charge of how my money was being invested.

It may seem strange, but after so many years of being in the financial information business, I still felt insecure about investing. I felt confident in my core ideas. I was definitely a conservative investor. But because I did not have the detailed understanding of specific investment strategies that brokers have, I often found myself deferring to them when my gut was saying “Don’t do it.”

If I, as someone that’s been in and around the financial industry for 30 years, can feel that way, I can only imagine the pressure someone else – who hasn’t had my experience or success – must feel when being pitched.

If you’ve ever felt like that, this story was for you. And the takeaway is this: You have to be in charge of your relationship with anyone that is handling your money. That includes stock and bond brokers, life insurance agents, financial advisors, estate planners, and even your tax attorney.

Don’t allow them to intimidate you. Don’t feel embarrassed when you don’t understand what they are saying. Say, “Stop right there and say that again, but without all the gibberish. If you aren’t able to explain it to me clearly, I will have to find someone who can.”

And if that’s not enough, remind them that you are the person paying their fees. You are the boss. Their job is not just to give you good advice and execute your wishes, but to make sure that they understand your preferences and follow them. And that they never, ever make you feel like you have to shut up and defer to them.

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