The Worst Career Mistake I’ve Ever Made

Experience is making mistakes and learning from them.

--Bill Ackman

Bill Ackman is an investing legend. The billionaire CEO of Pershing Square Management wisely shorted shares of bond insurer MBIA, handsomely profiting when the market collapsed in 2008/9. More recently Ackman is better known for his investing mistakes, including a sizable investment in Valeant Pharmaceuticals, which was later charged with fraudulent accounting, and a disastrous investment against Herbalife.

Unlike Bill Ackman, I’ve never made a billion dollars. Like Bill Ackman, and nearly everyone else[i], I’ve personally made my fair share of career mistakes, the worst of which started my career in finance.

After passing the Series 7 exam in late 2007, I was certain I had solved the mysterious world of investing. After all, FINRA gave me the seal of approval and I slayed the exam, including questions on options. Like a teenage driver convinced they’re the next Dale Earnhardt[ii] after passing the DMV driving test, I was the next Warren Buffett.

Reality harshly disagreed. Less than a year later, I exited the financial advisor business feeling like a failure.

As much as I’d like to believe the financial crisis played a role in my failure, the truth is I would have failed if market conditions resembled today’s. It took years of growth and introspection to understand why I didn’t succeed despite my best intentions and efforts.

I didn’t understand what business I was in – I wasn’t a financial advisor; I was a door-knocking salesperson. Big difference.

Although a financial advisor must be a salesperson on some level, a salesperson isn’t a financial advisor. Nowhere was that more apparent than in the firm’s compensation structure – it wasn’t based on helping clients reach their financial goals through prudent advice but rather from growing the firm’s top line through growing assets under management by any means necessary and then selling high-cost financial products.[iii]

Education on financial advising and portfolio design? “Fake it until you make it” was a common refrain from more-tenured and successful “financial advisors.[iv]

The key takeaway here is there are true professionals, salespersons, and charlatans all offering financial advice. Choose wisely.

When seeking a financial advisor, ask them:[v]

·         How do you get paid?[vi]

·         Do you adhere to the fiduciary standard?[vii]

·         What’s your investment philosophy and how do you allocate/rebalance assets?

·         How often will we meet or discuss the portfolio?

·         What licenses and professional designations do you have?

When seeking a financial advisor, ask yourself:

·         Am I comfortable with the quality and depth of the prospective financial advisor’s answers?

·         Am I judging the financial advisor’s knowledge on non-germane factors (physical attractiveness[viii], office, car, church attendance, political opinion)?

·         Will I be a valued client?

My story has a happy ending as I used the failure as motivation to learn more about the financial industry, going on to complete a master’s degree in finance and become a CFA charterholder.[ix]  Later I was hired by an organization where I learned a great deal about investing and stock selection.

 

[i] Pro-tip: If you haven’t made a career mistake, you should make up one because it’s a common interview question. Focus on personal growth after your mistake.

[ii] Junior or Senior, pick.

[iii] At a recent conference, I spoke at length to a few financial advisors from this firm. They noted the compensation structure and overall environment of this firm has changed. I believe them.

[iv] Ritholtz Wealth’s Michael Batnick wrote a great piece on how horrible this advice is.

[v] Consider this not as comprehensive list, but rather a starting point.

[vi] There are numerous ways a financial advisor is paid, both direct and indirect. Ensure all are disclosed.

[vii] Not adhering to the standard doesn’t mean the financial advisor is a crook, but it does mean potentially more conflicted advice.

[viii] I swear I’m not being paid by Ritholtz’s team, but this Josh Brown article has a great passage from Nassim Taleb’s about how you may want to avoid service providers that look the part. As someone who doesn’t necessarily look like the typical financial writer/blogger, I empathize.

[ix] See, that's personal growth.

Jamal Carnette