Crime Pays! (Well…At Least Writing About It)
February 22, 2013Crime. Drama. Tension. Suspense. All of these things sell a lot of books, draw a lot of TV viewers and sell a whole lot of movie tickets. And the whole industry makes a lot of money.
I had NO IDEA how much money a successful crime writer could make until I read this article about Patricia Cornwell. In honesty, I haven’t read any of her books but a friend of mine reads everything she writes and speaks highly of her work. There is so much information in this article that I could write 2 or 3 blog posts. There is a lot of “he said, she said” in the article because it’s about a lawsuit she filed against her financial advisors. Not only did she file, but she won a nearly $51 million judgment!
If she hadn’t won, she could potentially be looking at a bleak financial future because of her spending habits which seem a bit extreme. We have a big earning, big spending author suing a high end financial firm for losing money (she fired them in 2009 presumably after horrible losses in 2008, which was a historically bad year for almost all investors). She claims it was due to a shift from conservative to aggressive investments without her consent. They claim it was simply market performance overall during an economic downturn. The truth? It’s tough to tell what the truth is, but she won the case and was awarded significant damages. Of course, that judgment will probably be appealed so the case is probably very far from being fully resolved. This just serves as a reminder that hiring the right professionals can be a huge decision.
Who will you trust with your money? You have the option to manage your own money or let someone else do it. If you hire someone, they can act only with your permission or you can grant them the authority to act as they see fit. It’s good to know your level of comfort prior to making the decision. I’m only guessing that Ms. Cornwell and her advisors did not have this conversation in-depth.
What is your investment strategy? If you are a conservative investor (as Ms. Cornwell says she wanted to be), then you have to be able to live with investment returns that are not going to be very high. If you are an aggressive investor (as Ms. Cornwell states her portfolio was invested for), you have to live with the fact that you might lose money. Maybe a lot of it. Your top line decision – am I conservative, aggressive or somewhere in between – will drive the return of your portfolio much more than any other factor.
What are your spending habits? If you choose to have a lifestyle filled with Ferraris, helicopters and a $40,000 per month apartment, I am not going to call you frugal. If your spending habits are very frugal, that is probably going to impact how you view paying for financial advice (or not paying).
Deciding who to trust and hiring the right professionals can be a tough decision. In some cases, like this one, things get off track and litigation happens. And, then there are the Bernie Madoff full-fledged scam artists out there. If you’re thinking of hiring someone, here is a great guide to help you find and screen financial advisors.
With all the talk of risk, I don’t want to lose sight of an important fact. Nearly everyone I’ve met in the financial advisory business works very hard to do what they believe is best for their clients. Some of them are just better at it than others, and the rogue, dishonest, unscrupulous types are very rare. But, they make headlines! Someone getting great advice for 30 years in the context of a great working relationship just doesn’t sell papers, draw TV viewers or make for a very compelling movie. But, that is what happens in real life far more often than the Bernie Madoff-type of thing happens. If you’re thinking of working with a financial professional you should know that while crime stories get the headlines, they are rare and if you do some work up front you can greatly reduce the odds that you would be impacted.