The author of a new book on the advisory industry fires off this warning: If you’re reading this and you get pissed, you’re probably guilty of being a bad advisor.
Books that knock financial advisors and the financial services industry are almost a genre unto themselves, like Helaine Olen’s recent Pound Foolish, and they are often written by personal finance columnists.
Now, released Wednesday (though Amazon gives the release date as Monday), comes a new entry in this burgeoning field of literature, Get Wise to Your Advisor, which has the unique distinction of being written by a well known, veteran advisor.
“No longer do you have to fund the lifestyle of a broker or advisor to have him tell you how to diversify or where to find the next investment that cannot be missed,” says the blurb for the book, written by Steve Lockshin (left). “This book will provide the tools for calculators that tell you most of what you need to know.”
Lockshin, whose firm has regularly ranked at or near the top of best-advisor lists from Barron’s to Forbes and even this publication’s 100 Top Wealth Managers for 2011 list, seems to have an affinity for rhyming trisyllabic company names.
Founder and chairman of Convergent, an ultrahigh-net-worth family office serving 280 clients in Potomac, Md.; New York; Los Angeles; and Portland, Ore., Lockshin earlier founded Fortigent (now owned by LPL) and recently started but then closed Advizent.
That last enterprise has particular relevance for his new book. Lockshin invested his own financial resources in attempting to create a network of advisors free of conflicts of interest.
The network’s main purpose “was to try and create some clarity for some consumers and identify high-quality, capable fiduciaries, create a set of simple and measurable standards and hold those folks to those standards,” said Lockshin in an interview with ThinkAdvisor.
The advisor, who divides his time between Potomac, Md., and L.A., where he has a large entertainment industry clientele, said he wanted to spend between $30 million and $50 million a year on advertising as a means of raising consumer awareness of fiduciary advice.
To get that level of capital, he asked the major custodians and asset managers to agree to take a basis point off of the substantial assets brought in by Advizent’s 150 advisors with close to $200 billion in AUM.
The custodians he was speaking with — all the industry’s big players — and asset managers were dragging their feet, and Lockshin decided it would be better to shut down Advizent rather than risk not delivering on promises to the advisors’ clients.
Ultimately, these big companies, Lockshin says, “like things how they are; consumers’ lack of knowledge benefits those in the financial services industry.”
Lockshin suspended Advizent’s operations five months ago, but his efforts to raise the bar for consumers continues with his new book. He emphasizes that the target audience for the books is consumers, not advisors, and many of the latter may have a hard time accepting its message.
“If you’re reading this and it makes the hair on the back of your neck stand up and you get pissed, you’re probably guilty,” Lockshin warns.
“This book isn’t for [all advisors], only the honest ones,” he continues, adding that he hopes “high-quality RIAs” will distribute copies to clients and prospects.
Lockshin defines those high-quality advisors as those comfortable answering every one of the questions he suggests consumers ask of prospective advisors in his book’s chapter on choosing an advisor (Chapter 8).
Included among those questions are: “Do some investments you recommend pay you more than others?” Another is: “If I work with you, will I have a limited number of investment choices? If so, who decides which investments are in the universe of choices?”
The questions are significant, he says, since seemingly more trustworthy labels such as “RIA” have been denuded of meaning.