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Wall Street Steward Blog

Serious Money

I have never had an account minimum.  Don’t believe in them.  I believe that people need help managing their investments, no matter how big or small their accounts may be.

That being said, there does come a time in every advisor’s career where they are forced to have an account minimum.  Not because we don’t want to help small investors, but because we can only serve a finite number of clients and if we accept every new account, then our service model for existing clients is compromised.

A wise veteran advisor once told me that his account minimum was “serious money.”  Of course, I was 20 years old, so I had no idea what he was talking about.  Then he explained:

“If a multi millionaire wants to give you $50,000 to manage, don’t take it.  He is toying with you and testing you.  Your only choice is to try to make an impression, so you will take too much risk with the $50k and either double it or lose it all.  Either way, it doesn’t matter.  If you double it, did you really impact his net worth at all?  No.  If you lose it all, then of course he won’t give you any more money.  Refuse to take his test and tell him no.”

This resonated with me.  If the person really trusts you, then they should be willing to give you a large portion of their investable assets.  If they don’t, then they should not give you ANY.  No need for the “carrot test.”  I will dangle a carrot in your face and if you do well, you will get it all.  If not, you will get nothing else.

This person continued:  “If a person who has a total of $20,000 is willing to let you invest $10,000 of it, then THAT is trust.  That is serious money.  Giving you half of their net worth….they cannot trust you much more than that.”

So, as long as the money is SERIOUS to you, it is worth my time.  That is my stance.

There is a flipside to this.  You get what you pay for.  For small investors to expect world class service is neither practical, nor fair, and that is NOT the advisor’s fault.  They can have the best intentions in the world, but there are only so many ways we can help a small investor.  Many investments have minimums of their own, or are only available to accredited investors (high net worth people), etc.  If a family has a couple million to invest, that opens up a whole new realm of options for their money.  We have more cookie jars to pick from.  I am not saying that it is fair, but that is the way it is.

Think of it this way:  a personal trainer has two new clients.  Client 1 (Bart) weighs 400 pounds, has never worked out, and only eats pizza and cheeseburgers while client 2 (Courtney) has been training for 15 years, has 3% body fat, and eats a perfect diet.  The trainer has a lot of tools to help Bart:  a dietary plan, some cardio, strength training, some Gas-X to improve the air quality at his house….  How can he improve Courtney’s situation?  She doesn’t need a lot of help – she is already well on her way fitness wise.  Maybe the only value that the trainer could add for this person would be to instruct them to take a “rest day” once a week.  Minor improvement.

This means that the more money someone has, the MORE we can help them in ALL areas of financial planning (like Bart).  However, this does NOT mean that we cannot help the small investor at all.  It just means that there is no need for advanced estate and tax planning for someone wanting to begin an investment plan.  The small investor is Courtney.

Nothing personal.  It is what it is.  What is the small guy to do?  Most of the firms have found politically correct ways of dealing with the small investor issue.  Some firms just do not compensate the advisor on small accounts, while others have a call center (1-800 number) or charge a separate “small account” fee.

So, when it comes to my practice, there is no account minimum, other than “serious money,” but please do not be offended if I cannot service your account as well as my largest accounts. 

As long as you understand this fact up front, we will have a good relationship.  If not, feel free to not hire me.  All firms are limiting the service models available to smaller accounts in some form or fashion, it is just that I am willing to tell you the truth about doing it.