My investment philosophy, while I was running my business, was to invest my assets into three equal chunks, divided into real estate, cash, and business equity. I won’t go into great detail on my entrepreneurial investment philosophy or recommendations in this post, but if you’re interested, you can download a free copy of my book here.

Once I sold my business, it necessitated a change to my allocation and overall asset mix. I turned my business equity into cash by selling a substantial share of my business. The three-equal-buckets philosophy I had maintained for over 20 years, and that had produced an almost 30% year-on-year compounded return, needed a complete refresh.

Enlisting Help—or Not? My Search For a New Financial Advisor

I met with several investment financial advisors or brokers over the last two years, tried working with one for a brief period, and ultimately decided to do everything on my own.

I’ve admittedly struggled with asset allocation for the first year and, up and until the last few months, felt like a fish out of water. As a result, I floundered (no pun intended) for the first year, left most of my cash in a high-interest savings account, and waited patiently by the sidelines until I could come up with something I was comfortable with.

If I had one suggestion for any entrepreneur who sells their business (or anyone who comes up with a large amount of cash in a short period of time), my suggestion would be to put your cash into a high-interest savings account, short term T-Bill, GIC, CD, bond ETF, or some other similar conservative and liquid fixed-income position until you can comfortably make some longer-term decisions.

And don’t expect those decisions to happen overnight. It can take time and patience to invest strategically.

Just because you won the lottery (whether literally or figuratively), doesn’t mean you have to invest every last dollar the minute it hits your bank account.

Take Your Time With Your Asset Allocation Strategy

Quite a few times, I’ve witnessed individuals who feel compelled to invest their new-found cash quickly, making some otherwise poor decisions and ending up losing a lot of money early on.

Once word gets out that you sold your business (or won the lottery), you’ll receive no shortage of phone calls and emails from investment advisors, scammers, friends, long lost relatives, charities… who want a hand in your pocket. With regard to the advisors, they’ll promise to lead you down the path to further riches.

Tread carefully.

Unfortunately, finding an investment advisor you can trust will take time.

You obviously have the choice to invest your funds yourself, which could be a complex task, or you might choose to work with one or a few investment advisors.

I met with at least six different advisors and wasn’t impressed with any of them.

My Poor Experience with Financial Advisors and the Know Your Client (KYC) Document

There’s something in the investment world called “know your client.“

Know your client (KYC) protects both the client and the investment advisor. It protects the client because it assures the client that the advisor will only choose an investment suitable to the client’s financial situation. And it protects the advisor because the client confirms their investment goals and portfolio objectives in advance.

The know your client (KYC) concept isn’t unique to the investment world. It’s something anyone in a sales position, whether they’re selling real estate, B2B, financial services—or most things, quite frankly—needs to understand.

Anyone in sales needs to know their client, but it’s particularly important in the advisor-client relationship and is legally required prior to an advisor representing a client’s financial interests and making any recommendations and trades. 

There’s a detailed get to know your client questionnaire that’s filled out by the client with the advisor’s assistance prior to any formal trading begins.

Does The Know Your Client Rule Really Help Anyone? 

The problem isn’t the KYC document itself. The problem is getting a client to sign a piece of paper is quite different from actually spending the time to get to know a client.

The client-advisor relationship isn’t that different from any other sales relationship where the sales rep needs to know their client. But it’s so acutely more important in the financial community because an advisor is dealing with their client’s money.

And therein lies the problem: So few people know how to sell.

Advisors need to spend the time to get to know their clients. And getting to know your client goes well beyond filling out a get to know your client form template. It needs to include their client’s perspective on money just as much as their family, personal situation, long-term aspirations, likes and dislikes, and so on.

Let’s Circle Back and Discuss Sales 101

I wrote an article titled Sell Me This Pen. In the movie wolf of Wall Street, Jordan Belfort asks one of his sales reps to “sell me this pen.” The rep does a terrible job.He immediately jumps right into sell mode, talking about how great the pen is. 

How the rep sells the pen is the same way most people sell a product, whether it’s a house, stock, or pen.

They sell.

I did an informal survey and asked 20 people to sell me a pen. Of the people I spoke with, only one person did an excellent job of selling me the pen. Everyone else started by explaining how amazing the pen was.

Here’s what I wrote in the article:

Financial Advisors Need to Learn How to Sell

When I started looking for a financial advisor after I sold my business, I realized all the advisors I spoke with were not that dissimilar from my experience in hiring sales reps for my former company. Superstar salespeople are probably the toughest roles to hire for.

Just because someone has the financial acumen to be a broker or advisor, and may even understand money, finances, stocks, and so on, doesn’t mean they have the interpersonal skills and patience to really get to know their client.

We have two problems at play.

Some (not all, of course) advisors you find at a bank or investment firm are somewhat clueless when it comes to finances, the stock market, and asset allocation. To make it worse, many barely spend the time required to get to know their client. So you have a half-motivated advisor providing recommendations for a client they barely know. 

This problem isn’t unique at the lower end of the financial market either.

I spoke and met with at least six advisors. They were all nice enough people, but they all “sold” in the same way most salespeople try to sell a product. They asked some of the right questions, but they didn’t really spend the time to understand my overall asset allocation. 

None of them took the time to get to know me.

But Who Profits?

My overall sense is they were pushing products that would maximize their own commissions, especially the full-service broker who is compensated on a fee-per-transaction basis. I’m particularly suspicious of their advice because many are more concerned about lining their own pockets than yours. 

So the problem is that the advisors push the KYC document onto an otherwise unsuspecting client, which to a great extent absolves themselves and their firms. All the while, the industry is left believing the clients are protected.

I’m not trying to paint all financial advisors or brokers with the same poor service, poor sales brush. Many are excellent. I just haven’t come across any, and that’s why I’ve chosen to invest my funds myself. 

Fortunately, I enjoy it.

If you enjoyed this article, you might also enjoy this one: How to Become a Decamillionaire, Grow your Net Worth to $10 Million, and Join the 1% Club
Good luck with your wealth-creating journey.

You might also enjoy this one: How Much Money Do You Need To Never Have To Work Again? Let’s Do The Math.

You should also consider subscribing to my blog. I publish one article a week on small business and wealth creation.  You can subscribe here.

Also, I published a book during the summer of 2018, “The Kickass Entrepreneur’s Guide to Investing, Three Simple Steps to Create Massive Wealth with Your Business’s Profits.” It was number 1 on Amazon in both the business and non-fiction sections. You can get a free copy here.