Stony Brook Securities’ mandate is the empower the individual investor.
To give them all the tools necessary to manage their own money.
To build a financial future.
We teach individuals how to invest the correct way…
Not by buying, holding, hoping, and praying…
But by doing the right thing over and over and over again.
However, there are some out there that even with all the right tools, knowledge, and support do not want to do this.
They would rather have someone else do it for them…and we support those people.
And a big but…
But most financial advisors are absolutely garbage and will charge you money to lose your money. And although they may have degrees from business schools or certifications, they are terrible.
Why Financial Advisors Suck
Stony Brook Securities is a professional service. We have had the opportunity to teach thousands of customers, from many different countries, retail and professional.
And while we are a professional service, we cannot find a better, more professional way to describe financial advisors.
They absolutely suck.
Their returns…below average.
Their ability to change their strategy…non-existant.
Their transparency…was never there.
And while I could develop carpal tunnel talking about all their tactics to nickel and dime their clients…you can perfectly understand everything you ever needed to know about financial advisors once you understand what their business plan is.
Financial Advisor Business Plan
There is no shortcut or way to beat around the bush here. Simply…
Their business plan is to gather assets and charge fees.
While this is from the movie The Wolf of Wall Street, go to 1:35 to find out exactly what the plan is. There the broker is telling the up and comer what the name of the game is. Gather assets. Charge Fees. That’s it.
Now the important thing to note here is that there is no mention about making their clients money.
Some of you might be saying, “No that can’t be!”
But, there are SOME financial advisors out there that probably are okay.
And I am here to tell you there are only three questions you are going to need to ask them to find out if they are worth anything!
This should take you no more than 5 minutes.
What to Ask a Financial Advisor
The first question you need to ask is…
What is the probability my portfolio will make money?
I honestly don’t know what kind of answer some Slick Rick financial advisor is going to come up with where.
But the reality is, your portfolio’s chances of making money is always a quantifiable number.
As we spoke about it in an earlier post about stop losses, you can find your positions chances of making money by looking at their delta.
Add up all of your positions and whallah…you know your portfolio’s chances of making money.
If your financial advisor does not know this or says it is not possible to know, run for the hills.
Better yet, unless they can successfully explain how to find the chances of a position making money to a T…run for the hills.
The second question you need to ask is…
Am I diversified?
The average financial advisor off the street will instantly answer yes…because they have a “basket” of good companies in different sectors.
But as we have already spoken about at length, sectors are not even the tip of the iceberg when it comes to true portfolio diversification.
Diversification needs to be a comparison of price.
If your financial advisor cannot show you something like the below photo…run for the hills.
The third and final question you need to ask your financial advisor is…
How can you improve my chances of making money?
Realistically, the chances of any financial advisor getting this right and pretty close to zero.
You will probably hear a lot of comments about diversification or “good” companies…
But the reality is if your financial advisor does not say that he/she will “sell everything I can against all of your positions”…then run for the hills.
Selling against your position is part of a code basis reduction strategy.
Over time, this improves your odds of making money as is lowers your cost basis.
You just won’t hear that from a financial advisor.
Let’s look at an example…
$AAPL is trading right now at $114.33.
If you buy 100 shares, your cost basis is $114.33.
But if you sell a call against it, say for $1.00…
Your new cost basis is $113.33.
Now, who has a better chance of making money? The one with the $114.33 basis or the one with $113.33?
You know the playbook…now go out there and see if your guy is up to snuff.
Chances are he is not.
But you are. You can manage your own money. And you can be wildly successful at it.
Remember, the three questions you must ask are:
- What is the probability my portfolio will make money?
- Am I diversified?
- How can you improve my chances of making money?
You know the correct answers. Don’t be fooled by garbage answers or buzz words.
If they don’t know your chances of success…run.
If they don’t really know if you are diversified…run.
If they don’t know how to improve your chances of making money…run.