One of our core messages here at Money Morning – and one that we tend to repeat over and over – is that it is crucial for you to take control of your own financial destiny.
To underscore just how important this is, allow me to share a personal story I guarantee will drive this point home.
I've massaged the biographical details on this one a bit to protect the folks who are involved. But the rest of the facts are true.
This is the story of Alvin "Big Al" Clifton, the much-loved stepfather of a boyhood friend of mine. Big Al (who I always addressed as "sir") was the longtime manager of a highly successful paint-and-body shop in my hometown.
He knew everybody, and everybody knew "Big Al."
He was boisterous and colorful – an acquired taste for some, I guess. But he also had a heart of gold – as I well knew.
In the mid-1980s, just after I started my newspaper career at a small weekly (and was very poor), I stopped in to see Mr. Clifton after I'd banged up my Chevette – my daily transportation, and the only vehicle I had.
Although Mr. Clifton was in business to make money from precisely this kind of situation, I watched as he picked up his phone, dialed a buddy and within five minutes had arranged for me to get the hood, radiator-core support, grill and bumper that I needed – all for free.
Some years later, when the body shop was sold to a new owner from out of town, Mr. Clifton was unceremoniously dumped from the only place he'd ever worked.
They gave him a lump-sum distribution – a pension and severance – that amounted to about $140,000.
That wasn't even close to being enough for a guy who was only 59, and had enough health problems to keep him from starting a second "career."
And Mr. Clifton knew it.
"William," he said to me one evening when I was at his house for a visit, "you know a lot about investments, don't you? Well, here's my situation. I have 140 grand from my retirement and buyout. I need to double that in a year. And I can't afford to take any risk."
At first I thought Mr. Clifton was pulling my chain: After all, this was the colorful "Big Al"- a man who liked a good laugh.
But I immediately saw he was serious.
"That's not possible, sir," I told my buddy's stepdad. "To even try for a return like that, you're going to have to take on so much risk that you could actually end up with nothing. Please don't do it. I'll help you find someone good to work with, and we'll get a good plan worked out for you."
I argued pretty hard, as I recall, and even resorted to begging. I left that night believing I'd made my point.
Unfortunately for "Big Al," there are brokers out there who are only too happy to tell their "clients" what they want to hear. A young broker from one of the discount houses did just that.
"Sure, Mr. Clifton," the young broker assured him, "we can double your money."
Even more unfortunate: It was 2000, the height of the "dot-com" era – which made it seem possible to get the kind of returns Mr. Clifton was hoping for.
That young broker put Big Al in all sorts of dot-com stocks, "unit investment trusts" (UITs) that were focused on the Internet, and some other tech-focused investments that actually assessed penalties for early withdrawal.
The risk levels on each of the individual investments were huge. And they all faced the same risks, meaning that if one of the holdings got clobbered, chances were good that all the investments would get clobbered.
And that's exactly what happened…
Mr. Clifton was late to the Internet-bubble party. When it burst, his Internet-fueled portfolio blew up.
And the shellacking he took was magnified by the penalties he had to pay when he tried to extract some of his money from the high-commission investment products the broker had put him into.
By the time Big Al extricated himself from the smoking crater that used to be his retirement portfolio, he'd lost about half his money.
Sadly, he never recovered.
One day about four years later, the man they called Big Al told his wife that he felt lousy and was going to take an afternoon nap. Mr. Clifton never woke up.
Although he'd lived in Maryland, Mr. Clifton's funeral was held in the tiny Pennsylvania town where he grew up. The line at the viewing was so long that folks had to wait for two hours just to pay their respects.
I've thought about the sad case of Big Al often in the ensuing decade. And what I realized is that there are at least five lessons to learn from it all. They are:
- First and foremost, take charge of your own financial future. If you don't, no one else will.
- As part of Lesson No. 1, if you are going to invest, understand what it is that you're buying. Mr. Clifton didn't, and the hair-trigger booby trap that stood between him and his retirement savings proved to be disastrous.
- There are many good, professional people at work in the financial-services industry. But you have to watch out for the passel of jackals that are terrific at sensing weakness and vulnerability– the kind of vulnerability created by a lack of knowledge or understanding.
- Never try to "make" the money you need in the stock market. If you need $5,000 for a down payment on a car in six months, don't try to make it in the market. Mr. Clifton committed that sin, too, and it cost him.
- Be honest when you assess risk. Don't take on more than you're comfortable with, or that doesn't mesh with your financial goals.
Take these lessons to heart.
Embrace them as the "second chance" that "Big Al" Clifton never received.
With his 24/7 access to stock market gurus like Martin Hutchinson, Keith Fitz-Gerald, Shah Gilani and Dr. Kent Moors, Bill is able to provide Private Briefing subscribers with an inside look at some of their key recommendations.
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About the Author
Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish... and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.
Too many have experienced the same situation as 'Big Al'. A cautionary tale and sad to see a good person being taken down by these 'professionals'.
I second John Ashton's comment. God Bless Big Al's soul. Could have happened to me, I refused to
allow the defeat to put me down. I lost 4 times Al's loss. I never opened the investments file and never will, now that my ex passed it to her lawyers and claimed that I was incompetent in the financial sector, and never returned the file. I would not have opened it anyhow. It's the only way to keep one's sanity, that is to bury the fact and carry on working and don't do it again. Please do not trust anyone to control your money. Please do not. There might be decent people whom you could trust, but Unfortunately the bad ones have spoiled it and one can simply not be trusting, not any more. So, make do with the little you have and do not worry about the future, because it will take care of itself, somehow. Better to have and hold the bird in hand, than chase a bigger one which may fly away or even bite you.
Remember also the big words of someone wise, I forget who it was who said: The butcher does not give you meat because you are hungry, neither does the grocer nor the baker. They all give you food because it suits them, because they will take your money which is good only for them.
with respect
Sad story. I hope I can learn from it. Thanks for sharing.
I always say knowledge is everything and knowing how to apply it. For my GOD says, my people perish for there lack of knowledge.
Keep running this article. We need to be reminded of this situation. It happens over and over.
Many of us have experienced the same fate. Most are now too scared to gamble the same way as "Big Al." The jackals have the loudest ads and we believe they can do the impossible and we the meak are surely the disadvantaged. I think the market is the worst of all ways to gamble. We never hear about the vast numbers of insiders that have tried the game and haven't succeeded in acheiving their fondest dreams. There's a lot of "Big Als" we don't hear about. My title: Sucker Bait.
Been there done,,, lost a fortune in the dot com bubble.
Sad thing it is the same today. The market is made up of take you to the cleaners advisors.
Pay off your mortgage and debts, that is the only thing that is real.
The soundest of all advice.
question: Is there a easier way to spot hucksters than reading, trying, and finding out (ON TIME OR LATE) who they are ?
Yes, there is.
First let me say that I gave a sum of money to a stockbroker that I first met in the third grade. He was a "friend". He put my 401k money into a limited land partnership. For those of you unfamiliar with such vehicles, the main goal is tax benefits–you take your depreciation as ordinary income, but your gains as capital gains. Back then, capital gains were half your ordinary income tax rate. As you probably know, there are NO TAX ADVANTAGES IN A 401K. To this day, I don't know if he was incompetent or was part of a "pump and dump" process by his management. (He worked for one of the larger investment firms.)
I gave that "financial advisor" $4,000 in 1982. Had he simply put it into an index fund, I would have over $100,000 today. (recall what the market did in the eighties and nineties) I cashed out that 401k in 2004 for the magnificient sum of $3,800.
BUT, to answer your question. Don't give all your money to one advisor. Give them a relatively small amount and see how they do. I've done this four times. I'm still looking for a "good" financial advisor. While I would dearly love to "turn my money over" to someone, I still manage it myself. I'm still looking.
always,
tony
The story of Big Al highlights the main reason for not privitizing social security.
"Pump and Dump" crowd be an example of the jackals?
do you shoot straight from the hip son?
It goes well with the headline at the top of the page. "this biotech could double your money in the next 12 months"
Yes, and roulette can double your money in two minutes. Why wait 12 months?
'Big Al' probably saw the world through rose coloured glasses, and why no? Such a shame. But I bet that it didn't change his philosophy on life.