The Devil You Know...(spoiler alert)...is Still a Devil

Saying:  “Better the devil you know.”

Explanation: Something bad but known is better than something unknown. This proverb describes how to deal with something unpleasant. The “devil” could be any bad person, place, or thing.

This is an Irish proverb that has been in use since the 1300s.  While I’m sure that it has proven itself useful from time to time, it strikes me as quite defeatest and potentially harmful in the modern era.  Let me explain to you why.

As I write this (late March 2020), the major investment markets have been through several volatile weeks as a result of a global pandemic, the COVID-19 virus.

There is a strange phenomenon that occurs in the world of investments every time there is a major market disruption, and I have been witnessing it more than ever in the past several weeks.  Investors are frustrated, disappointed, and/or angry with their broker. I hear frequent comments about how results have been poor, communication has been sparse, and recommendations for the future (if present at all) are poorly considered.  They know that they deserve better, but the environment has them too frightened to make a change. The perceived danger of “something unknown” is simply too much to overcome.  

An old friend in the industry offered me this useful metaphor.  

“When a ship passenger finds themselves in a storm, they do not consider changing boats, all they know to do is cling to the mast until they see calmer seas.”

When he put it this way, the behavior did make sense to me.  Fear can be a powerful paralytic agent.

The counter to the boat analogy is this.  What if another boat pulled up and it was clearly more stable and built to withstand the storm?  What if the Captain was capable of calmly and competently sailing through all types of seas? What if the second boat was the Coast Guard?  Would you let go of the mast then?

Over the past few weeks, a handful of new investors have come aboard.  I am both grateful for their trust and relieved to know that they are in a better situation today than they were when they entered this storm.  It may not be a surprise to read that most Upleft investors left another relationship to become clients. What you might not expect is that I never consider part of our job to be “taking” clients from other firms, but rather rescuing them from relationships that no longer served them in a way that they deserved. 

The boating metaphor doesn’t exactly apply to the risk implied by the “Devil You Know” saying though.  That is the risk of the unknown. I submit that there are several ways that this problem has been made obsolete by the combination of modern technology and the ubiquity of information.  There is no reason anymore for a new advisor to truly be “unknown” today. A little research can help an investor to answer several important questions.

Question: Does this person have any past bad financial decisions, bad behavior or customer disputes to disclose?

Answer: You can look a broker up with just a name and zip code at https://brokercheck.finra.org/ or you can look up an advisor at https://adviserinfo.sec.gov/.  There you can see any customer complaints and arbitrations, regulatory actions, employment terminations, bankruptcy filings, and criminal or civil judicial proceedings.

Question:  Are you required to act in my best interests when giving me advice?

Answer:  There are a few ways to check if someone has made a commitment to a fiduciary standard of care.  Independent RIAs (not affiliated with broker/dealers) are held to this high standard when interacting with clients.  Those acting as broker/dealer representatives are held to a less stringent suitability standard. A quick brokercheck (https://brokercheck.finra.org/) lookup will tell you if someone is a broker.  Another way to be sure that someone is committed to acting in your best interest is to check if they are a Certified Financial Planner Professional (CFP®).  You can check that here https://www.cfp.net/verify-a-cfp-professional.  All holders of the CFP® designation, including brokers, are required to act as fiduciaries.

Question:  What do you believe?  How do you think about the world as it relates to personal finance?

Answer:  This should not be a difficult question to answer today.   There have never been more methods available for a professional to share with their thoughts with the public.  A quick look at their professional website, blog, and/or social media presence might be a good place to start. Check if they have a newsletter or if their opinions have appeared in any reputable media sources (Google is a heck of a resource).  If you can’t find the person you’re searching for with a little effort, you may wish to consider whether or not they are actually looking to work with new people.

Having taken three quick steps, you now know how a person thinks, if they are committed to acting in your best interests and if they have to disclose any items from their past.  It didn’t take much to make your new option feel quite a bit less “unknown.” You might now be in a better position to hold them up to the “Devil you know.”

For more on this topic, please feel free to check out “What To Do When You Deserve Better” or “Two People to Forgive & One Trick to Moving On.”