Why your financial advisor shouldn’t be an early adopter

I grew up at a time when video players came out and it was exciting going to XtraVision to hire a film to watch it at home. When you walked into a XtraVision, the VHS tapes were kept on the left and the Betamax were on the right. Almost everyone had VHS but there were always rumours of someone who had a Betamax but no one I knew ever saw one.

Early adopter with your money?

Now, imagine that your financial advisor in the 80’s came to you with a great investment opportunity; Betamax videos players! People being able to watch movies in their own home, at a time of their choosing. They could also record programmes off the tv. You go all in and what happens, you lose all your money as VHS wins that two horse race.

Fast forward to 2009 and the introduction of Bitcoin to the markets, something that was worth $0 when first introduced (worth $50,000 today). It becomes more popular but with drug dealers and criminals as it can be used to pay for contraband sold over the dark web. Now crypto is an asset class and it looks like it is here to stay but we still don’t know which ones will be VHS and which will be Betamax. It looks like Bitcoin will make it but will Dogecoin?

Do you want to have an all or nothing advisor?

Part of the reason of hiring a financial advisor is to grow your wealth over the long term. You don’t want one that will tell you to invest in something that may make you 10x or end up worth nothing.

As advisors, it’s pretty easy to tell a client that their money has gone from €100,000 to €1 million. They think you are brilliant and will recommend you to all their friends. But we don’t want to have to those conversations with clients where we tell them their money is gone and that’s it. Do that often enough and you’ll find yourself out of business.

That’s why we are boring with the recommendations that we make. We research the market and where returns come from. We formulate investment strategies based on that research and match investments that have shown over the years to be able to match their benchmark at a reasonable cost. We need to see that a fund has performed over time and not just go on a gut feeling. This can lead to frustration from clients when we don’t agree with some of the investment ideas that they have. But it is because we either didn’t research their idea or we did and we didn’t think it was suitable for our clients.

We will never be early adapters to the latest investment idea or strategy because that is not what you hire us to be. You want us to ensure you have money in the long term. If you can afford it, there may be room for some “play money” where you can invest some of your money in assets that may blow up but you know that in advance and are willing to lose it.


Steven Barrett

06 September 2021