books about online stock trading, forex, futures, stock investing, market, trading systems
Control over Your Advisors
back to contents page

One of the most painful, costly, yet priceless mistakes I made early in my business career was to think that my accountant knew more than me. You may recall at the start of this book, my rich dad said that my business had financial cancer. One of the reasons the business had financial cancer was because the three of us thought our accountant knew what he was doing.

After the nylon and Velcro wallet business got into trouble, the first thing the accountant did was cut back on our sales and marketing budget. He said, “We need to trim our expenses and pay our creditors.” Not knowing any bet ter, we let him do that. After the company had crashed, I discovered that the creditors he paid off were his friends who invested in our little company. In other words, he left the company without any debt to his friends and the rest of us were left holding the bag.

After this learning experience rich dad said, “Always remember that you are the entrepreneur, the visionary, and the leader. Never let your advisors run your business. When business begins to slow down, spend money . . . spend a lot of money on promotion. After business has picked up, then you can cut back and pay off some of the bills that came from the promotion.” He also said, “Too many people cut back on promotion when business slows, rather than spend on promotion. When business picks up they spend in stead of cut back. That is one reason why so many small businesses stay small. They cut back when they should spend and spend when they should cut back. This is also true of big businesses.”

After September 11, I noticed many companies begin to cut back on their sales, marketing, and promotion budgets. That is a sign that the company is run by the accountants and advisors rather than the captain of the ship.

The Betrayed Investor

The February 25, 2002, issue of Business Week, with the cover that read “The Betrayed Investor,” interviewed three people in their cover story article. Two of the betrayed investors interviewed were attorneys and one was an accountant.

The story of the accountant reads like this:

James J. Houlihan Jr.'s plan to retire at 50 is gone. In the last two years, he lost about 30% of a portfolio invested in such stocks as EMC, Lucent Technologies, and WorldCom. Now, the 41-year-old must work harder to rebuild his four children's college funds. “I just don't understand how a business can appear to be so strong and in six months become a fraction of its value,” laments Houlihan. “There are people who know what's going on, and then there's the rest of us.” He'll save more and spend less—but he's not counting on stocks to make up for what's lost. He and his brother run an accounting firm in Fort Wayne, Ind., so it's not as if he doesn't understand analyst reports. But now, he says, “I don't pay them any credence. It's complete B.S. It's gotten to the point where you don't know who you can rely on.”

The story of one of the attorneys reads like this:

Until three years ago, 31-year-old Manhattan attorney Heather E. Barr had no interest in the stock market or planning for retirement. She finally signed up for one of three Salomon Smith Barney Inc. funds offered by her company's 401(k) plan at the urging of a co-worker. It also happened to be at the peak of the market. For a while, the account did fairly well, but by last year, she had lost a third of her money. The last time she looked, the account was worth less than $2,000. She has since stopped opening her statements. While she still puts an automatic $50 a month into the plan, she's not holding out hope for a rebound. “I don't have any faith in the stock market,” she says. “Everyone says you have to ride it out and be in for the long haul. Maybe that's true, but putting money in a shoe box would have landed me more.”

You're the Captain

The point is not to put down accountants, attorneys, or any other highly educated professional. The article's choice of an accountant and two attorneys illustrated the point that there is more to being the captain of an ark than having the financial literacy of an accountant and being well versed on the rules like an attorney. Accountants and attorneys are highly specialized professionals, and more often than not from the E or S quadrants. Being the captain of your ark requires you to operate in the B and I quadrants, which requires you to be far more generalized than specialized. In other words, a specialist knows a lot about a little and a generalist knows a little about a lot.

One of the hardest lessons I had to learn is to listen to my advisors, trust my instincts, and live with my decision, right or wrong, good or bad. As rich dad said, “You are the captain of your ship . . . not your advisors.”

A Lesson Relearned

Recently, I had to painfully relearn the lesson that I am still the captain of my own ark and financial statement. Kim and I had purchased a property in De cember of 2001. After our accountant and tax advisors had blessed the in vestment, we then turned the finalization of the agreement over to the seller's attorney and our attorney. Two months later and thousands of dollars in attorney's fees, the investment fell apart. What seemed like a simple trans action had turned into an expensive nightmare.

Stepping back into the negotiations, I found out that the two attorneys were now personally at war with each other, rather than professionally and objectively putting the deal together. The negotiation broke down over points that did not matter. All the attorneys could do was focus on what was wrong with each other rather than what was right for the deal. The strong positive points of the investment had been forgotten. The investment objectives, i.e., cash flow, appreciation, depreciation, and tax free gains, were not important to the attorneys. Being right was. Two months of time and tens of thousands of dollars were lost because I let my advisor run the ship. I could hear rich dad saying, “Just because someone is smart and went to a good school does not mean they know anything about the real world of business or investing.”

Rich dad surrounded himself with very smart people. He was an active listener and treated each advisor with respect. Yet at the end of the day, he always remembered that he was still the captain of his ship. The final deci sion was still up to him.

Be the Captain

Many of the recent losses in the stock market were caused simply because too many people let advisors run their arks. If you are going to be the cap tain of your ship, you need to be in control of your advisors.

Smarter trading The art of day trading Trading Chaos Sane Investing In An Insane World
Beat The Odds In Forex Trading
The Five Rules For Successful Stock Investing
Forex Conquered -High Probability Systems and Strategies
Robert Kiyosaki - Rich Dad's Guide To Investing What The Rich Invest In