Clients ask advisors to investor in wacky stuff

on Nov8
by | Comments Off on Clients ask advisors to investor in wacky stuff |

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Financial advisors are often lauded for their investment acumen. Frequently, their biggest value is in saving clients from their worst impulses.

Indeed, top advisors on CNBC’s annual Financial Advisor 100 list have received ample requests for strange, risky or outright dumb investments during their careers — and, if left to their own devices, clients may have otherwise lost hundreds of thousands or millions of dollars.

“People still hope for the home run — that this scheme or this idea will set the world on fire,” said David Rea, president of Salem Investment Counselors in Winston-Salem, North Carolina, which ranked No. 2 on this year’s FA 100. “And they can be sold.”

Long live the pay phone

Bags of silver

Decades later, Mirsberger was able to save another client from likely major losses in another “hot” investment. This time, it was stock in Zoom Video Communications, a video-conferencing company whose shares soared early in the Covid pandemic at a time when people couldn’t meet face-to-face.

The client was adamant about buying hundreds of thousands of dollars of stock in the ticker ZOOM. But there was one problem — that was the wrong ticker symbol. (The correct ticker is ZM — a fact Mirsberger luckily flagged before any money changed hands.)

ZOOM was a so-called penny stock issued by Zoom Technologies, which hadn’t made a public disclosure since 2015. The Securities and Exchange Commission halted trading in March 2020 because so many investors were making the mistake.

An advisor’s most important job?

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Investors get about half those returns from behavioral coaching (helping a client stay disciplined and control emotions) — accounting for the biggest share relative to other advisor services, according to Vanguard.

However, clients often don’t see that value. Investors ranked “helps me stay in control of my emotions” as the least valuable attribute of a financial advisor, among 15 choices, according to behavioral researchers at Morningstar.

“The advisor is there sometimes to protect people from themselves,” Mirsberger said.

Dog parks and beer

The client would likely need to pump about $1.5 million to $2 million into the project, Wilbanks said.

“But it’s a pretty neat investment,” he added. “There’s this whole world of dog parks that are big with millennials.

“This was a great eye-opening experience for me.”

As we look ahead to 2022, CNBC’s Financial Advisor Summit will bring together forward-thinking advisors like the FA 100 firms to hear from industry heavyweights about the state of the markets and share innovative ways to address the needs of their clients. Register to join us December 8th.

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