Frequently I am impressed both with the lack of knowledge about money expressed by some readers and the equally surprising level of expertise and good common sense expressed by many others. One recent letter in response to a Moneywise column on finding, selecting, and working with a financial adviser relates so many practicable ideas that I will share parts of it with you. She writes:
"I hasten to tell you, after reading the article enclosed, that most bankers and economics teachers are hardly qualified to give advice.
"The vice-president of a major New York bank advised me as a displaced homemaker in 1955 that "there is a major recession coming and the only place your money will be safe is in one or our savings accounts.' I crossed the street and managed to eke out 6 1/2 percent. Has I known about debentures, how to evaluate stocks, and about money markets, I would have more capital now.
"Teachers of economics I have known either do not understand our capitalist system or merely fail to participate in it.
"I would suggest that a better adviser than a banker or teacher would be a person who had succeeded in a management position in industry or a large business or somehow managed to create a thriving small business. Look for someone who has retired at 50 with enough capital to have a choice in the options of retirement living. Usually such a person will be proud enough of his own achievements that he will be happy to share his expertise and would probably do so in terms easily understood by a novice in finance.
"Learning to handle money effectively requires diligence and discipline and perpetual self-education, but it is a splendid and exciting challenge to discover how this greatest of earth's societies really works and to partake of its benefits."
This reader, while a part owner of a jewelry manufacturing company, is also an associate professor at a university -- not of business, but of music.
Several comments may clarify my own response to Ms. M's letter:
1. My previous article did not suggest asking an economic professor but rather a teacher of investment analysis or personal financial planning.
2. Because many seeking individual financial advice are executives of big businesses, I cannot agree across the board with the idea of asking a succesful controller or chief executive for advice. Often, they are so wrapped up in their business activities that they have little time for planning their own personal finances. This is one reason many major corporations offer financial planning as a fringe benefit to their executives.
3. Small business entrepreneurs can be cagey managers and know the true value of a back. They also tend to scrounge every available dollar for investment in their own business rather than in stocks, real estate, or commodities.
4. Probably the best idea is to search out persons who have "made it" by 50 -- even 60 -- with a bundle of assets to support them during retirement in fine style. These canny money managers may have come from university faculties, the executive ranks of major corporations, or may be small business entrepreneurs, farmers, or working men and women. The important element is to search for that unique person who understands the generation of capital through saving and the investment of that capital through sensible risk/analysis and diversification to gain compounding benefits that far outdistance average returns.