PCCLOSEOUT

There are some great brokers out there as well as some who aren’t so great, but if you’re in awe of brokers (who now often call themselves financial advisers, figuring, I guess, that broker isn’t the most confidence-inspiring title), or if you believe you can’t possibly take any investment action without one, I want you to know how it feels from the other side. I was a very good stockbroker, but I had no mystical insights, no inside sources, no information I could learn that you couldn’t learn, too. And a good many brokers out there probably feel like the Wizard of Oz hiding behind his curtain. It can be a scary business, investing other people’s money.
There is not one adviser out there who wants to lose money for you, I can promise you that. The good ones would probably rather make more money for you than they do for themselves. It’s also true that financial advisers are real live human beings with feelings, insecurities, bills to pay, dreams of their own, pride, and ego.
Imagine the pressure. Most people don’t want to deal with their own money, so try to think how it feels to be responsible for dozens of other people’s money, their livelihood, their futures. Think how an adviser feels if she recommends an investment to you that she can’t afford to invest in herself. Is she telling you the right thing to do? Think how she feels if she’s also investing in the stock herself—will it cloud her judgment? The pressure, particularly if the broker is a caring person, can lead to what I call the jitters, which is not a good state in which to make important financial decisions.
The jitters occur when raw nerves take over and important decisions about money, which after all are decisions about people’s lives, are made from fear and ervousness, rather than from that pure inner voice and true knowledge.
Suppose an adviser has built a tremendous position in XYZ stock. As he sits at his computer terminal, he watches every time XYZ moves up and he watches every time XYZ moves down. With every tick down, his phone rings and it is a client asking about XYZ; with every tick up, he awaits the next tick down, he gets jittery; the notion hits him that maybe it’s time to sell.
Now he starts punching in the symbol of that stock over and over again to get more detailed information than what the screen normally tells him. He watches the volume: What do others who are selling know that he doesn’t know? He looks at the bid, the ask, the research reports. What do they really mean? He calls a few of his friends who also have a position in the stock, to see what they think. Even if none of these people had been thinking sell, even if they reply, “Well, I really still like the stock,” something happens. Doubt has a domino effect; I’ve seen it.
Meantime the supervisor walks by to remind the adviser, who works on commission, that he hasn’t met his sales quota this quarter. To do so, he must buy some more stocks on his clients’ behalf or sell some more. Then his wife calls. They need a new furnace. Then the woman at the next screen starts jumping around with joy—another stock she has built a position in has just gone through the ceiling. She begins making excited calls to tell her clients the great news. Then our adviser
•hears a tick and looks at the screen: XYZ is down another one- half point.
After a few hours of this, the adviser makes the decision,
• s his clients, and sells the stock. End of jitters? No way; now
real test begins. If the stock starts rising, the phone begins ringing with clients wanting to know why he sold so soon. It’s almost harder not making as much as could have been made in a stock than it is to lose some and feel relief at not having lost everything. The whole experience goes into our adviser’s jittery memory bank and is automatically recalled the next time he thinks about buying or selling.
It takes an extraordinarily disciplined person to overcome these jitters and to make continually intelligent decisions based on his or her pure inner voice and what can be learned about a stock. It takes even more discipline to believe what you know when the jitters of other people who happen to own the same stock as you are spreading through a brokerage firm like the flu.
If you decide you want to go with a broker, fine. If you already have a wonderful broker who has so far done very well for you, even better. Best of all is if you decide to handle your own money and feel powerful and confident about doing so. In any case, though, it is your money—and it must be guided by what your inner voice tells you to do.