I had the privilege of conducting a brief Q&A interview with Wade Slome, author of How I Managed $20,000,000,000 by Age 32 (available at www.Sidoxia.com). Please feel free to ask questions throughout the day as Wade will provide commentary. A random drawing will be held for a free copy of Wade’s new book, to enter simply leave a comment or question to enter the drawing.

Question: Wade, managing 20 billion by the age of 32 is fairly impressive, your extensive training and education is equally impressive, can you tell us what you feel were three most important experiences that got you to the point of managing such a large pool of money and brought you so much success?

Answer: There were a number of influences, but undoubtedly family encouragement along with the importance placed on education played a major role in my success. Beyond that, a quote that rings true for me comes from philosopher Albert Schweitzer who stated, “Success is not the key to happiness. Happiness is the key to success.” If you are passionate about your professional pursuits, then I strongly believe success will accrue to that individual over time. Fortunately for me, I found my passion in investing.

Question: It seems there is a great deal of advice to avoid the media and talking heads on TV lately, what alternative resources would you recommend today’s investor seek out to achieve better returns?

Answer: The society we live in today is geared towards instant gratification and short-termism. The “Cramer-ization” of America with the get-rich-quick trading strategies only hinders wealth creation and delays retirement. The best media sources come from individuals that have invested money, for long periods of time, and have been successful throughout economic cycles. It’s entertaining to listen to all the intellectuals opining about imminent Armageddon, but if you truly listen to the seasoned pros like Warren Buffett, Jeremy Siegel, Bill Ackman, Howard Marks, and other veterans, you quickly realize that periods like these are great for investing. Your audience would be much better served by reading a good investing book (no plug intended) rather than listening to a talking head spewing the headlines of the hour. Irrespective of investment style, the achievement of long-term superior returns comes from independent thinking, going against the herd, and as Warren Buffett says, “buying fear and selling greed.”

Question: There are still autopsies being performed on the cause of the current economic calamity but do you feel that more government regulation is needed to prevent future banking and economic crisis? If not, then what will help change the way Wall Street does business

Answer: Yes, heightened regulation is necessary, and we have already seen dramatic changes in our financial system. The fact that investment banks (i.e., Bear Stearns, Lehman Brothers, Merrill Lynch) that existed for generations evaporated in a blink of an eye is clear evidence regarding the need for increased transparency and regulation. Over history, the sentiment pendulum of government regulation swings from one end to the other, and we are clearly coming out of a period where regulation was sorely lacking.

Fear and greed have existed as long as humans have existed. For example, rampant speculation and manipulation took place in the “Roaring 1920s,” accompanied by margin lending going off the chart. The massive banking collapses occurring in the late ‘20s and early ‘30s led to constructive regulation, such as the Glass Steagall banking act of 1933 (separated commercial and investment banks) and the establishment of the FDIC (Federal Deposit Insurance Corporation for insuring bank depositors’ money).

More recently, over the last decade or so, we have seen a number of large schemes and frauds perpetrated (Enron, WorldCom, Canary Capital, rogue traders Nick Leeson [Barings Bank] and Jerome Kerviel’s [Societe Generale], etc.), and now you can add the Bernie Madoff scheme to the list. I can guarantee you, this will not be the last securities fraud or scheme we see or hear about. Greed and fear will always be a part of our financial markets and white-collar crimes will persist. Eventually, these scams are uncovered, people go to jail, lessons are learned, and productive regulation is implemented.

Question: Your new book offers advice on asking critical questions before selecting a financial adviser. Can you give us a sneak peek by sharing with us one thing a person should ask when selecting a financial adviser in today’s tough market conditions?

Answer: The most important question has three answers: fees, fees, and fees. If you are buying high ticket items like automobiles and homes, most people shop around and are not bashful when asking about price. So if you are potentially paying thousands in fees for an adviser’s services, then why not shop around? Unfortunately, you almost need to go to law school to read and understand the masses of fine print in brokerage statements and prospectuses. Make your adviser explain ALL fees in terms you understand, and if you get unclear or evasive responses, then I encourage investors to move on.
Your average broker may be charging you multiple load fees, management fees, 12-b1 fees, surrender charges, administrative charges, excessive trading commissions, etc. The less you spend on fees, the more you keep, the earlier you retire, and the more vacations and toys you can buy. The industry trend is shifting towards “Fee-only” advising. I’m obviously not the only “Fee-only” adviser around, but the transparency and clarity around this fee-structure is vastly superior in my opinion. Unlike most brokers, as a “Fee-only” adviser, I have no products to sell and no inherent conflict of interests in the portfolio management process. Under the “Fee-only” structure if the investor portfolio depreciates in value, then the adviser’s paycheck goes down in sympathy. Therefore, both the client and adviser have an incentive to create wealth. On the other hand, most brokers are commission-based, and therefore they collect their commissions up-front. As a result, brokers can tuck away commission and use them for cruises and sports cars whether the client portfolio tanks in value, or not.
Rich, I think you struck a chord with that question!

Question: Wade, I appreciate the time you’ve taken to answer these questions on your virtual blog tour. Do you feel that bloggers can fulfill the need for alternative media and provide a better forum for investment ideas, investor education and information exchange?
Absolutely. Just like stocks, in the blogosphere there will be a lot of dogs, but there are plenty of hidden gems. The difficult part for the average investor is separating the wheat from chaff. As I mentioned earlier, I am partial to those bloggers that have invested their own money, suffered from their own battle scars, and have a true passion for investing.

What do you think might be the potential pitfalls with relying on bloggers
for financial advice?

Answer: Everybody’s financial situation is unique, and has the potential of getting tremendously complex when you introduce such things as retirement planning, tax planning, estate planning, insurance strategies, education planning, etc. Certain bloggers will be more educated and equipped in providing answers to difficult questions, while others will not. Readers need to educate themselves and continually ask questions. Investing is both an art and a science, so readers have to be skeptical in their consumption of blogger advice.
If you haven’t seen the movie, “Super Size Me,” it’s a documentary that follows an individual who voluntarily decides to eat McDonald’s fast food for breakfast, lunch and dinner for 30 days. What you soon realize is that his health rapidly deteriorates due to the barrage of greasy Big Macs and fried Apple turnovers. The same principles apply to financial bloggers – subjecting yourself to trashy information will be harmful to your investing health. Fortunately Rich, your blog has nothing to worry about!

Question: Wade, we’re excited about your new book and I’m sure Get Rich Slick readers will be eager to read it but can you give us a sneak peak at what your next big project might be?

Answer: Right now I’m having a blast with my book tour and doing quite a few speaking engagements to better educate investors on the pitfalls and opportunities in investing. The next step, who knows? Maybe I’ll start my next book . . . How I Managed $40,000,000,000.00 by Age 42?!!

author-wade-slome

Wade W. Slome, CFA, CFP®
Sidoxia Capital Management, LLC (www.Sidoxia.com)
Plan. Invest. Prosper.