This tale is very short and has one purpose and one purpose only.  It is to recommend that when you work with an advisor that you meet face to face with the advisor and preferably in your home.  I say this because on more than one occasion I was able to make recommendations that were completely outside of what I would have recommended had the client just been a phone interview or an interview in my office.  Meeting with both the husband and wife at their home gives the advisor a better sense of what is appropriate and important to them.  There is no model that I can develop that tells me what matters to my client other than meeting with them where they live.

I met Jerry at his business and he looked very successful and prosperous.  He was a charming and upbeat man and before long we agreed that our next meeting would be at his home so that we could review things with his wife as well.  In my opinion, it is vital that both spouses participate in any discussion about family finances and is the reason why I insist that we meet with husband and wife.  A few days later I show up at his house, meet his much younger wife, see the two Mercedes in the driveway and a large well-decorated house.

In our previous discussion at his office I had asked him about life insurance.  He said that he had a condition that prevented him from getting preferential rates and that he knew that he was underinsured.  A few minutes at his house explained the medical condition.  He had the biggest private bar stocked with the most liquor I had seen outside of a public bar or restaurant.  In addition, it was a very hot and humid July day in Maryland and he didn’t have the air conditioning on in his house.  This told me he was either trying to pinch pennies and save on the electric bill, or that it was broken.  I asked him about it and he said that it was healthier.  I looked over at his bar filled with liquor and felt the sweat trickle down my face and knew Jerry was lying to himself.  I knew something was up.  What he said and how he lived didn’t match.

Next I asked him to show me his tax returns and investments.  I’ll never forget what he told me as he handed them to me.  He said, “You’ll see that we are not living large.”  I looked at the materials he had given me and the first thing I immediately knew is that he was either living large or that he was hiding something from me or his wife or both.  Based on what I saw he was living very large.  There was no way that he could afford his lifestyle based on his income or his asset level.  He wasn’t a good candidate for me as a client and at a later time, while his wife wasn’t present, I told him the reasons why.

I explained that it was impossible for him to maintain the lifestyle that he was living based on what he made or what he had in his portfolio.  There had to be more money coming from somewhere.  He insisted that he wasn’t hiding anything.  If he was telling me the truth then I could only assume that he was eating into his portfolio every month and that his portfolio would at some point dwindle to zero.  I told him that I was not the savings police.  I explained that I could only help people that are willing to help themselves.  I even told him that instead of spending thousands of dollars on liquor for his bar that he should turn on his air conditioning, forgo other forms of consumption and make investing a priority.  I would have loved to help Jerry and it pained me to walk away but I knew that if wasn’t willing to take his life seriously that he wouldn’t take his investing seriously and by default, he wouldn’t take me seriously.

I told Jerry what I thought he needed to do and went on my way.  A few minutes in his house told me he was a lost cause from an investment perspective as well as other perspectives.  Had I not spent time in his house I would have just assumed that what he told me is what he was going to do and I would have been very wrong.  Only later, probably within a month or so after we established a portfolio would the truth appear and I might have made an inappropriate recommendation that might have hurt Jerry.  Of course that would have been the least of Jerry’s problems but good advisors know when to walk away from situations where they can’t help.

A few years later I ran into Jerry and asked him how things were going.  He said that he had lost his business, he was divorced, living by himself in a rented apartment and was in between jobs.  He didn’t look very healthy and I knew his unraveling had been his lifestyle.  I knew there was nothing I could have done for Jerry and his wife within minutes of walking into their home because he wasn’t going to take my advice and I could have scripted the way things played out.  How did I know?  Jerry had misplaced priorities.  Jerry didn’t have the air conditioning on in July.

Carlos Sera

Carlos Sera Founder of Sera Capital Management, LLC Co-Founder of Chicago Wealth Management, Inc. Registered Investment Advisor Speaker on Financial/Investment Planning Fluent in Spanish – First Generation Cuban/American Author of Financial Tales Blog Education Johns Hopkins University – BA – Natural Science – 1980 University of Rochester – MBA – Finance and Applied Economics – Honors – 1982 Find me on:  LinkedIn | Twitter

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