EDITOR'S NOTE: This is the second in a series of columns about questions to ask when choosing an investment advisor.
“When your prized possessions … start to weigh you down; Look in my direction … I’ll be ‘round … I’ll be ‘round.”
— “And Your Bird Can Sing” by The Beatles
“What are your personal spending habits?” is one of several important questions that an investor might ask a potential investment advisor. If a financial advisor lives frugally, an investor can assume that the advisor is just as prudent when managing the investor’s assets.
Knight Kiplinger wrote in a column called “The Invisible Rich” that “the biggest barrier to becoming rich is living like you’re rich before you are.” Interestingly, several “Super Rich” club members still watch their money carefully. Kiplinger’s interviews reveal that:
• Oil magnate T. Boone Pickens only buys three news suits every five years and only owns 10. “That’s all I need,” Pickens says.
• David Cheriton, an early Google investor whose estimated net worth is $1.3 billion, asks for a “to-go” box whenever he eats in a restaurant. Cheriton says he has been cutting his own hair for 15 years and drives a 1986 Volkswagen.
• Actress Hillary Swank, who grew up poor in
• Bethany Frankel is credited with originating the Skinnygirl cocktail brand, and recently sold her company for $100 million. But she still only buys her clothes on sale and frequently buys from discount sites online.
Of course, watching your spending will not make you rich. But it’s a good habit, one that many members of the “Super Rich” cannot shake, even when they can afford to splurge. Waste is something they cannot abide.
Imagine encountering a fantastic, outdoor waterfall in front of an advisory firm’s office. The waterfall is designed to impress the potential investor and to suggest that the firm inside is powerful and successful. The fact that the cost of the expensive outdoor decoration was borne by clients is lost on some, but not on others.
The homes, office space and cars of investment advisors are often clues as to how they handle their own finances. Like most smart buyers, advisors want to purchase quality, and sometimes must pay for it. Buying a home in a solid neighborhood where property values are expected to appreciate, for instance, is a wise move for anyone, investment advisors included.
But an advisor who doesn’t respect money on their own personal level might not be respectful of yours either.
Margaret R. McDowell, a syndicated economic columnist, chartered financial consultant and accredited investment fiduciary, is the founder of Arbor Wealth Management, LLC, (850-608-6121 — www.arborwealth.net), a fee-only registered investment advisory firm located near Sandestin.