Paul Meloan – Vested Interest

Forty years ago President Jimmy Carter lamented that America was “over-lawyered and under-represented.” Today, money kept with an asset management advisor is often over-managed and under-advised.

There are numerous regulations and disclosures about how firms manage assets. However, there is precious little information about how they advise clients. The late, great Peter Drucker famously said “what gets measured, gets managed.” He certainly has a point with firms that manage money.

What does your Asset Management Advisor value?

While important, disclosure forms and dollars under management devalue what real advisors do.

Buried in the boilerplate somewhere is a statement where a firm states the number of accounts it manages and the amount of assets they contain. It is not hyperbole to describe these numbers as the basis by which too many firms and advisors judge themselves.

<Neanderthal grunt-voice> “More assets: GOOD! More accounts: GOOD!

Firms have been known to fudge these numbers to make them look bigger than they really are.

I have known (and still know) advisors who can tell you their firm’s AUM (within $1 million or so) on any given day of the week. It’s an obsession, the same way Pete Rose obsessed over his batting average. Rose could famously slap a line drive into left field and four steps down the line to first could recompute his batting average to four decimal places in his head. Too good to verify.

Advisors do this because our industry obsesses over size: assets managed, revenue, profits. When you’re in the money business, money tends to be what counts the most. I am proud to say that for 11 months of the year I have only a very general idea what our assets under management are; it simply does not affect what we do every day.

Money is not what matters the most to our clients: it’s what the money does (or does not do) for them.

What should your Asset Management Advisor value?

Real financial advisors are much more involved in the money’s purpose: What is this money meant for? When will it be needed? What are we willing to give up in order to make sure other things happen?

Real financial advisors confront these questions with clients every day. Real financial advisors deliver critical advice with empathy and compassion. They give clients the answers they need to hear instead of the answers they may want.

The SEC disclosure form never asks advisors how they do that. Not one entry explains how we as a firm have a bias towards the simple instead of the complex. No line discusses how people who become clients tend to stay clients.  Thankfully, there is a place to say where I have been doing this since 1998 (and my partners started not long after me). I don’t expect the SEC to see the world our way. The challenge is up to us to make this clear.

Paul Meloan is the co-founder and co-managing member of Aegis Wealth Management, LLC, in Bethesda, Maryland USA. Before Aegis Paul was a practicing attorney as well as working in the tax practice of Ernst & Young, LLP.

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