My office phone rang one day last week. On the other end of the line was a woman who is a back door neighbor to a client of mine.
The woman had recently sold a business that her late husband had left her. She had several million dollars to invest. The first thing she asked me after she gave me these details was about my track record.
In the investment advice business, an investment advisor’s track record is the investment performance returns on his current client’s accounts.
I have been an investment advisor for over 31 years. Any time I hear an immediate question about my track record from a potential client, the alarm bell goes off in my head.
Investment management track records are in most cases fictional. The numbers can always be juggled around in order to make the investment advisor look great.
Worse, the investment performance numbers are in the past. You can’t manage money in the past. You have to manage money in the present. And you have to be able to manage your investment risks in the future.
I very calmly stated to the woman that my track record had not one thing to do with her investment objectives. I asked the woman about the investment objectives of the money she had to invest.
The woman asked me again about my track record. I told the woman that I have seen many individual investors lose a great deal of money over the years because some investment advisor showed them a good track record.
The woman then stated that she did not understand what the problem was with me giving her my track record.
I gave the woman one more shot at some investment common sense. I told her that it was much more import for her to be asking me questions about how to preserve her investment principal than it was about my investment track record.
With the stock market near all-time highs, and interest rates near all-time lows, a track record does not make much difference.
The woman said goodbye, and hung up the phone. She and her millions of dollars are probably still searching for a track record.
I called my client to thank him for the referral and to give him the bad news. He laughed and said he was not surprised.
Ric Lager
Lager & Company, Inc.
