CINCINNATI BUSINESS COURIER
December 24 – 30, 1984
INVESTMENTS
Charles Vaughan
WHADDAYA LIKE?
Anyone who has been in the investment business more than 10 minutes has heard that question at least a dozen times. The problem is how to answer it. I often feel like saying, “Well, I kind of like the Beef Wellington.” Unfortunately, sometimes the question is asked merely to make conversation, and other times, it is really an indication that the person asking is in need of investment advice.
When I first started in the investment business back in the early 1960s and had all the answers, I would promptly respond with the hottest research idea or tip I had at the moment. As you might expect, I learned the hard way how stupid that was a real no-win situation. Only three things could happen. The questioner could buy it from another broker and blame me if it didn’t work out (and take credit himself if it did). He could do nothing, but watch it and razz me if it went down. Or, worst of all, if he were considering me as a prospective broker, he could be totally turned off by my lack of professionalism.
When you think about it, asking an investment professional what he likes is akin to asking a doctor you meet on the street what he likes. Imagine how you would feel if he said, “Well, I’m recommending a lot of ‘Inderal’ right now, great drug.” Or, how about asking a lawyer what he likes and having him reply, “Medical malpractice looks good right now.” If physicians responded as our mythical doctor did, he might be right.
It is easy to make the assumption that a person asking such a question is looking for an idea for quick profit. Having dealt with many clients over the years, it is obvious to me that investment prescriptions are, in reality, as individualized as pharmaceutical ones. Just as no attorney would comment on the merits of a case before he had the facts and no physician would suggest treatment without a thorough diagnosis, a financial consultant should not offer an investment without determining suitability for the investor. The investment professional takes the time for getting acquainted with the client’s financial situation, objectives and personality before making recommendations.
There are numerous telephone investment solicitors from all over the United States calling anyone who is suspected of having money to invest. The tone sounds very familiar. You have the opportunity of a lifetime. Get rich quick. Inside information. Can’t miss. Huge tax savings. Tremendous yield. All the smart money is buying it. You’ve got to buy right now or miss the boat. Some of these are legitimate firms with aggressive marketing, others are outright fraudulent operators.
It is true that some of these calls offer worthwhile investments and some of these callers are quite persuasive. The problem is how to sort out the good possibilities from the high pressure garbage. Here is a list of suggestions to help you in this process:
Investment Solicitation Watch List
• If there is any money lying on the street, nobody is going to put it in your pocket.
• If the yield is way above returns on comparable investments, carefully examine the safety features.
• If it sounds too good to be true, it probably is!
• If it has to be done right now, pass.
• If you have never heard of the firm, ask for written information about it.
• If the caller is not concerned with the suitability of the investment, you better be.
• If the word “guaranteed” is used, find out by whom.
• If it’s a tax loophole the IRS doesn’t know about, neither should you.
• If it offers more than a 2 to 1 tax writeoff, have it closely examined by a professional.
There are lots of people around who can’t wait to tell you what they like and how to buy it from them. The real key is to see if they are professionals or just high – powered salespersons. As for me, if someone other than a client asks what I like, I’ll probably just smile and suggest the Beef Wellington.