For many people, the biggest impediment to wealth accumulation is not lack of income or poor investment skills, but insufficient restraint when it comes to spending. The problem is especially acute for people with full-blown shopping addictions, a disorder akin to compulsive gambling, OCD and impulse control problems. It is easy for such people to fritter away on piles of junk what could be nest eggs worth in the hundreds of thousands of dollars. Project just a few thousand dollars annually of ill-advised spending over several decades, bake in the effect of lost investment income, and there you go.
The problem is compounded by the rise of Internet shopping and TV channels such as QVC and HSN. It is becoming ever easier for people to waste vast sums on shopping sprees without getting off the couch, let alone leaving their homes. Indeed, elderly people with insufficient interests and positive outlets for their time are particularly susceptible.
A while back, the quirky, short-lived (1999-2002) NBC TV series Providence made sport of this real problem. An elderly character who had to cease work (after a severe head injury left him cognitively-impaired) whiled away the hours by watching TV shopping channels for hours on end, ordering mountains of useless debris that overwhelmed his home and lawn, while also depleting his savings. Did one or more of that show's writers have experience with a parent or relative who engaged in such self-destructive behavior? I wonder.
This is yet another example of how a background in psychology can be of enormous use to financial planners, financial advisors and their clients. Also note that credit counseling is a growing field. Yes, more than a few of these outfits do not operate ethically. Before taking a job with one, consider checking with the local Better Business Bureau, the state consumer protection agency or attorney general's office to see if it has a clean record.
Better yet, many reputable financial institutions with name recognition, such as banks and credit unions, are putting credit counselors on staff. This is a career option worth considering. Also note that the Bureau of Labor Statistics classifies credit counselors with loan officers, requiring similar skill sets and earning similar pay.
That said, all these financial professionals would do well to refer clients with full-blown shopping addictions to appropriate medical personnel or psychologists. Or, if a shopaholic is a technophobe, they might advise family members to block the TV shopping channels via parental controls (and to be happy that this person has no interest in learning to use a PC!), while bracing themselves for the addict's wrath at being cut off from his or her fix.
Under the Investment Advisors Act of 1940 (often called the "1940 Act"), brokers and registered investment advisors are held to different standards of conduct. Brokers must recommend investments that are "suitable" for their clients. Investment advisors, however, are held to a more stringent code of conduct, the fiduciary standard. A fiduciary must put the client's interests first. This is a subtle, but important distinction. Brokers thus, technically, can put their own interests first as long as they meet the suitability standard.
This distinction was the principal reason why Merrill Lynch was late in following the industry trend to rebrand brokers as "financial advisors." The conservative legal and compliance departments still in place at Merrill in the 1990s feared that such rebranding would force adoption of explicitly fiduciary standards of conduct. In recent years, calls to impose the fiduciary standard on the brokerage industry have increased.
Back in my 20s, I signed on with a leading management consulting firm (specifically, the consulting division of a then-Big Eight Public Accounting Firm that is now part of the Big Four) out of frustration with my previous employer, a corporate behemoth with a long history as a regulated monopoly where corporate politics and personal empire-building often trumped fiduciary responsibilities to the shareholders. I switched to consulting in the naive expectation that, here at last, I'd be in an environment where you were paid to call them as you saw them.
Then came an engagement where I was on a team doing due diligence for a proposed corporate acquisition. When my colleagues and I reported to the partner in charge that this deal looked very bad from every imaginable angle, he flipped out. The acquiring company's president, he informed us, had hired us to tell his board of directors what a great idea this was. I was astonished and disillusioned.
Not only should this be a cautionary tale for idealistic young folks considering careers in consulting or mergers and acquisitions, but it also should serve as a red flag to guardians of the shareholder purse in financial organizations. Beware of approving projects solely on the say-so of consulting firms that were hired by the projects' proponents in your company. Where possible, conduct your own due diligence.
Skeptical about a what a hired expert witness says in court? Distrustful of public affairs programs whose lineup of "expert" guests consistently present a rather narrow spectrum of opinions? Cast an equally critical eye at consultants whose conclusions support what the person who hired them advocates.
Meanwhile, my attempts to offer dispassionate and analytic commentary yield some strange fruit. For example, I recently received an e-mail solicitation from a partisan organization that, apparently, mistakenly deduced from one of my posts that I was an ally.
In a nutshell, lawsuit lenders extend credit to individuals, mainly plaintiffs in personal injury actions. Meanwhile, players in the equally new field of litigation finance extend funding to corporate litigants, including many members of the Fortune 100.
Love it or hate it, this sector of financial services is growing, and probably here to stay. It's worth your while to learn the basics about it.
If you are interested in organizational culture and history, and in how a corporate art collection can be used to enhance a firm's image and legitimacy, hurry on over to the Princeton University Art Museum (it's free) to see the excellent, instructive exhibition Picturing Power: Capitalism Democracy and American Portraiture before it closes on June 30. If you miss it, there's also a companion book. Follow the link for details on both.
The exhibition is drawn from the collection of the New York Chamber of Commerce, which peaked at over 300 portraits. Alas, financial woes forced the Chamber to sell its holdings in the 1980s, with the vast majority ending up either with the New York State Museum or with now-defunct investment banking firm DLJ. The latter's story is a particularly fascinating study in public relations and corporate image making, a story that has taken a new twist after DLJ's acquisition by Credit Suisse. Again, follow the link for the full story.
A growing number of farsighted colleges and universities are going the extra mile to help alumni who have lost jobs and are having difficulty finding new positions. One has an official in its career services office whose fulltime job is finding innovative ways to help displaced alumni find new work. Another is proactive in identifying alumni who work for troubled firms, and e-mailing them offers of assistance. Several are offering high-touch personalized job hunting services to alumni; this is a far cry from my own experience as an undergrad at Harvard and MBA at Wharton, where we were largely on our own in job hunting.
These smart institutions recognize that this sort of outreach is an outstanding way to cement alumni loyalties. Those of you who'll be applying to colleges or graduate schools in the fall should take notice. Consider making what these institutions are doing for their alumni in this a key factor in your choices.
Some years ago, a good friend told the story of some sage advice he got on the eve of his ordination to the clergy, more than 50 years ago. Top of the list was this: never let anyone take of picture of you with a drink in your hand.
It may be worth your while to comb the online archives of The New York Times for the "Career Couch" in the August 2, 2009 Sunday Business section. It offered an excellent primer on how to handle (or, better yet) to politely decline potent potables while at company events, or while among work colleagues and superiors. The author warns that the new employee who drinks at a company event always is being closely scrutinized. Don't think otherwise.
The same section also has a fascinating pair of charts based on American Time Use Survey data, comparing how employed and unemployed people spend their typical days, minute by minute. Keeping in mind that this is self-reported data, it is interesting to see how the unemployed use the extra free time. Roughly an extra hour each goes into:
- TV viewing
I have some familiarity with this survey, since it is used extensively by an academic economist whose research papers I review before they are submitted to journals.
On this Armed Forces Day, it is worth noting that the financial services industry has a longstanding affinity for hiring military veterans, especially for positions such as financial advisors. A year ago, Edward Jones launched a new initiative in this vein, called the FORCES program. It is designed to qualify as a training program covered under G.I. Bill provisions that provide supplemental income while the beneficiary is participating. Nonetheless, receiving such benefits is not a requirement for participation.
Already a major employer of veterans, to date Edward Jones has hired nearly 500 additional vets as financial advisors under the FORCES program. Follow the link for details.
In difficult times, unscrupulous characters prey upon desperate people. If you are a job hunter, be especially careful about unethical placement firms with questionable practices, such as charging job seekers for arranging interviews with prospective employers. This violates the job placement industry's accepted canon of ethics. The standard model is for placement firms to be paid by the hiring company, either on a commission or on a retainer basis.
Even in flush times, you have to beware of shady operators. I found my way into Merrill Lynch via a small placement firm that had forged a close relationship with the corporate CFO and controller. This was right before the big market crash of October 1987, and Merrill's financial organization was hiring like gangbusters at that time, looking to beef up internal controls and analytic capabilities. It later transpired that one partner at that firm was extracting kickbacks from candidates who landed jobs through his efforts. He was the my initial contact at that firm, and handled my case for a while before handing it off to one of his partners. I had no idea of his underhanded actions (which resulted in his forced exit from that firm) until after I landed the job, and his partner called to check on my satisfaction with the new job.
I've emphasized over and over, both in blog posts and in articles, that financial professionals are expected to do a lot more than just the traditional accounting and financial functions, especially in the financial services industry. My colleague Alison Doyle once brought to my attention a survey commissioned by finance and accounting job placement firm Robert Half Management Resources on just this very topic.
The bottom line: the 1,400 CFOs surveyed, covering a broad sample of companies by size and industry, expect senior accountants to have increasing amounts of their time devoted to non-traditional functions, such as strategic planning and information technology projects. On average, the CFOs surveyed believe that a typical senior accountant spends just over a third of his or her time on such non-traditional functions, and they projected this figure to climb steadily over time.
Of course, this is a survey and not a detailed, scientific time and motion study. Moreover, it is a survey in which high-level managers make guesses about how subordinates (some of them well down the line) actually utilize their time. So, while we should take the actual numbers with a big block of salt, it still seems to prove the point that senior accountants are expected to do a lot more than simply tally up figures and produce reports, and that these expectations are growing over time.
While I am not accountant by trade, I did spend several years as a departmental controller at Merrill Lynch. As I have noted previously, I spent more like 90% of my time on such non-accounting functions while in this position. In the Robert Half survey, 20% of respondents felt that the typical senior accountant would spend over 50% of his or her time on non-traditional functions five years from now.
The lesson for accountants: advancement is bound to depend more and more on the ability to take on duties and add value far beyond the job descriptions historically associated with accounting positions.