photo by epsos
Written by Dave Young, President of Paragon Wealth Management
I have never understood why many financial advisors sell products to their clients and don’t personally invest in them.
If they are good for their clients, they should be good for themselves, right?
This creates a situation where once the financial advisor receives their commission they often become disinterested spectators. They have no “skin in the game”, so to speak.
I believe that advisors who sell investments they do not personally own often do not fully understand the investments they are selling.
An advisor who is invested in what he is selling is much more interested and emotionally involved because they experience exactly what their clients experience. They feel the same stress that their clients feel when the markets go down and the same satisfaction when the investment goes up. It’s a lot easier to empathize with clients when you really understand what they are experiencing.
The same is true of the mutual funds. If a mutual fund is as good as advertised, then certainly the manager would want to own it, so that he can benefit along with everyone who buys it. In 2005 the SEC started requiring mutual fund managers to disclose how much money they have invested in the funds they manage.
Shockingly, recent studies show that only about 40 percent of managers invest in their own funds.
According to a recent study by Morningstar, on average, the more money a fund manager invests in their fund, the better the fund does. Interestingly, those mutual funds in which the manager invests their own money are ranked higher in the Morningstar rankings and have been in existence, more than twice as long as those who don’t.
I founded Paragon Wealth Management for the purpose of managing my own money 25 years ago. Twenty-five years later, I still have most of my stock market investments invested in Paragon’s portfolios, Managed Income and Top Flight. In addition, all of our eligible employees invest in Paragon’s portfolios through our 401(k).
We continue to be invested right alongside of our clients. Our motto is “Do as I do” versus “Do as I say.” It really makes a difference.
Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results.