Advice for the Young at Heart

Over the past two weeks I've attend two conferences titled "The Future of Finance" presented by two different organizations. To be fair there is a connection between the said organizations but the delivery of ideas and positions are quite different. One organization relies on the academic and government careerist point of view which was predictably hostile to past activities without taking any reasonable amount of accountability. The other organization presents experienced financial industry stalwarts, some of whom have taught college part time and spent the time flirting with the endless experiments that sprang from the industry only to embrace the new normal dogma (and add that they questioned those products all along).

However, while I applaud the ongoing debate regarding the need for more trust and transparency in the financial services industry I can't help thinking that what was strongly missing from the events was perhaps less talk articulating the problem and more talk on fixing the problem. For example knowing there is a need to be more transparent, albeit obvious to most, is not the same as actually knowing how to recognize it. Among the primary goals I commit to are a non-conflicted ecosystem for my clients that start with assurances of my accessibility at anytime. Another is to focus on my asset management services and to support the meaningful importance of my credibility through a steady diet of continuing education in an industry that experiences elusive changes in perspective with a frequency comparable to the markets themselves. But that's where I stop, because unlike many in the financial services industry the advice most commonly provided is so with the aim to deliver products.  And in the instance where discussion can be had regarding insurance, estate planning or tax services, advice can easily blend into a lecture on the benefits, rather than the needs. These are areas where transparency is easily confused. That's why the difference for me begins with my experience first and in areas that I openly profess marginal knowledge it's my experience with insurance, estate planning and tax burdens that steers my solutions for which the outcome for clients is talking to a professional not a holistic generalist.

Now in projecting the contributions needed to fund a retirement plan I can't underestimate the value, while understanding the effect of tax rates, inflation rates and the average volume of life changes (kids, homes, jobs, parents), to having a great investment plan. And if at any time we decided to liberate state lines to bring down insurance costs, embrace broad tort reform or overcome the barriers to simplification of our tax system, the level of transparency that would emerge would take the world of financial services that much closer to the trust it so desperately craves.

The Art of Fine Mining

Like it or not (I do) ours is a mercantile system. We build things, we market things and we sell things. That pretty much sums up the efforts of every member of the S&P 500. But when the popularity of some corporate platforms smothers any otherwise negative blemish there are still those members who can perform the holy trinity of capitalism only by going the extra mile to convince the user of the imperative need for a given product. The success of this practice goes under many different monikers and has been endlessly debated over by journalists and academics, and is contingent on a simple assumption, that “a sucker is born every day” and legitimized by another assumption, namely "buyer beware"

There are a number of industrial countries in the world who look after their financial agencies with an air of cynicism but with something far less disdainful than here in the United States. At the root of the problem is the assumption that either through regulatory zeal, a hand holding soulful arrangement of Kumbaya, or both, we can become the only transaction led economic system in the world that is perfect. When living in the UK, some years ago, I first heard the casual description of capitalism as "vulgar". That would be a stretch for me; I'd rather look at it as imperfect.

For example the markets witnessed this week the newest saga in the ongoing challenges to the industrial complex by what the press like to call activist investors. That would be a few select hedge fund managers who for their extravagantly large carbon footprint needed a friendly label to exercise their life's passion and "green" wasn't gonna do it. One such investor, Bill Ackman, gained recent notoriety on the heels of a multibillion dollar attack on the company Herbalife (HLF) that bills itself as a nutrition company, pitching weight management, healthy meals and snacks and doing so since 1980. Does it work? There is a lot to question but it's worth noting that there is a long history of American manufacturers coming up with products that fulfill the primary ambition of the American consumer, which is namely to buy things that they think they want, that they might not necessarily need, and all too often they can't afford, except on credit. While Mr. Ackman might really believe that the company was deceiving its customers, he is an investor first and he made sure he was prepared for his claims to sway the action of sellers. Contradictions are becoming more apparent in the information age and while it gives investors enough time and access to decide the merits of a market claim, it doesn't completely protect them from the less obvious and legal flaws in capitalism that are under appreciated by regulators in favor of more politically advantageous posturing, such as high profile "fine mining" of corporate coffers.

The efforts that initiated the products that contributed to the recent crisis in the financial system illustrates how capitalism invites competition, and the skills that have been most profitable have been ingenuity, perceptiveness and greed, which have historically been used within existing rules in every industry including healthcare and technology. And finding the narrowest of crimes to face a non criminal endeavor isn't new; some of the most famous criminals in history have been brought down for crimes ranging from tax evasion to mail fraud but more like Bernie Madoff brought themselves down when the markets lifted the curtain and revealed their crimes.

What I believe is needed is not an endless stream of regulatory directives too eagerly gamed, but rather our regulatory agencies filled with more competitive players who think like competitive payers.  Leveling breathtaking fines might make some people happy but regulating capitalism at its own game will bring out something more important over the long haul…confidence.