DLS Consulting

Financial Advisors & The God Complex.

More than 30 years of being a financial advisor, and working with clients with large portfolios as well as many with less than $50,000 of investable funds taught me many things. In the 1970ís I built my primary base of business by becoming familiar with municipal bonds and the credits that backed each bond. But I was always drawn to the great potential gains that could be derived from owning stocks. Early on, I was drawn to finding a good value and then positioning it with as many clients who would be suitably able to own that stock.

Along came a company called Stirling Homex who were making modular homes and able to build and install an entire home at one half the cost of traditional construction. They built them in low cost areas of the mid south and then shipped them down the Mississippi River to the southern states. Earnings and prospects were booming when I bought stock for my clients at $12 to $15 per share and when the stock hit 20 I was beating my chest with pride at how much value I was adding to my clients portfolio. But the stock did not stay at 20 very long and one day I came to work to find the stock had dropped from 22 to 10 before it even opened for trading. I frantically called my research people and the trading desks to find out what was going on since my company had a favorable opinion on the stock. It seems that the management had overstated earnings and the SEC was looking into their accounting. By the time my research was done that day, the stock was down below $5.

Suddenly, this whole idea of owning 20,000 shares of stock spread around all of my clientís accounts didnít seem like such a good idea. Since this stock was evaporating into thin air, and I was responsible for recommending it to them my discomfort was growing daily. Oh yes, I could rationalize that there were several other good recommendations that I had made that would offset this bad one, but the pit in my stomach said otherwise. STIR soon declared bankruptcy and the whole bubble image they had built left shareholders with nothing but a bunch of concrete shells. I had also placed some of my own hard earned funds in this company and the lessons being taught were being felt in many places.

Financial Advisors are very similar to professional athletes in the sense that you are only as good as your last idea and your last victory. If you make a lot of good calls, you can develop a very big head just like athletes who are leading a winning team. Learning to deal with the inevitable failure will tell more about the human psyche and the heart than all of the victories and successes. As a believer, these experiences made me much more humble in how I would explain or present an idea or an investment. Trying to be more explicit about the risks inherent in any investment compared to the rewards is also good business. I also vowed from that day forward that I would never back away from my mistakes. I called ALL of the clients who owned that stock and I explained what had happened. Owning up to my mistakes as soon as possible and taking responsibility for them is a giant step toward maturity.

I Corinthians 4:4-5 (NIV) ďMy conscience is clear, but that does not make me innocent. It is the Lord who judges me. Therefore judge nothing before the appointed time; wait till the Lord comes. He will bring to light what is hidden in darkness and will expose the motives of menís hearts. At that time each will receive his praise from God.Ē

Monday Morning Message Sent 5/18/09


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