Tuesday, 24 August 2021 — Gold Coast, Australia

By Vern Gowdie Editor, The Rum Rebellion

[4 min read]

Dear Reader,

‘The only thing to do with good advice is to pass it on. It is never of any use to oneself.’

Oscar Wilde

‘Good advice is always certain to be ignored, but that's no reason not to give it.’

Agatha Christie

One thing you learn through life is that no matter how well meaning it might be, not all advice is good. So, use your common sense to figure out whether it’s useful, useless, or harmful information.

This sound piece of advice was given to me in my youth by an elderly neighbour. I credit that over-the-fence conversation with having played a major role in putting a filter over my thought processes.

Over the years, there have been many other ‘sound bites’ that have stuck with me.

‘Beware, your sins will always find you out’…that was my mother’s way of saying always act honestly and truthfully and you’ll never have to look over your shoulder.

In the 1980s, Barry Maranta (co-founder of the Brisbane Broncos) told me, ‘If you nurse a mug, he’ll die in your arms.’ If you continually help someone who doesn’t want to help themselves, you’ll only end up disappointed, frustrated, and poorer for the experience.

Over the years, that simple piece of advice has saved me a tremendous amount of time, heartache, and money.

The advice that most sticks in my mind happened purely by chance a couple of years ago…at a café on a cruise liner.

While we’re on the topic of good advice…

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He was straight out of casting central for the role of statesman. Mid-70s. Tall. Lean. Silver-haired. Well groomed. He greeted the staff and crew in an easy and friendly manner. This was a man who was quietly confident.

What struck me most was the timbre in his voice and the measured way he spoke. I’ve heard a lot of public speakers over the years, and I had no doubt this fellow could hold an audience in the palm of his hand.

Long story short, we struck up a conversation and arranged to have dinner together.

Ken was a retired attorney…a former senior partner in one of New York’s prestigious law firms.

He and his wife lived in Connecticut.

He was intelligent, an excellent communicator, and very well connected.

The opportunity to spend time with a person of this calibre doesn’t come along too often.

I intended to make the most of it.

When he practiced law in New York, Ken’s clientele were mainly wealthy individuals, families, and business owners.

He had a front-row seat on family disputes, messy divorces, contractual disagreements, and bankruptcies (Chapter 11 filings).

My question was simple and designed to elicit as much knowledge from him as I could.

What lessons had he learned during his professional life?

In a nutshell…

• People need to recognise that a lifetime of saving deserves respect.
• Wealth is permanent and irreplaceable capital.
• It’s imperative to avoid errors that put your family ‘out of business’.
• It’s far easier to lose money than it is to make it.

Ken made each point with gravitas.

Here were his other gems of advice…

Let go of your ego. Building and retaining wealth is an evolving challenge. Markets can be far trickier and more treacherous than you give them credit for. When you start to believe you are better than you really are, that’s when you’re at risk of overreach.

He told the story of a client who made and lost a fortune in Brooklyn real estate during the US housing boom and bust. The developer started to believe his own press. His ego got the better of him and he made the fatal mistake of surrounding himself with ‘yes’ people.

Never think you are smarter than the market. Keep grounded. Remain open to advice that’s at odds with your own thinking. Challenge your assumptions.

Successful investing is all about discipline. Too many people invest to minimise boredom, rather than to maximise the risk-versus-reward return. Sound, long-term investing is dead boring. It takes time and patience to build wealth and only a rash moment of impatience to lose it. Never invest for the adrenalin rush. Managing boredom is a key skill for successful investing.

He’s learned more from his (and other people’s) failures than he did from success.

Expect the unexpected. Anything can happen to alter your plans. He told me about ‘a friend of a friend’ who tragically died in 9/11. The person concerned did not have adequate life insurance to cover the family’s debts and lifestyle costs — private schooling, college tuition, and vacations. The family received a substantial payment from the September 11^th Victim Compensation Fund.

The payment bought them time to rearrange their affairs…downsizing the family home, selling the holiday home, clearing a sizeable seven-figure debt, and making alternative education arrangements…but the payout went nowhere near replacing the future earning potential of the family breadwinner. Had there been sufficient life cover, the upheaval to the family (who were still dealing with the emotions that come with the loss of a loved one) would not have been necessary. When you’re fit and healthy, you do not expect the unexpected.

Decisions are made based on tomorrow being the same as today. But things can and do happen. Make sure you have back-up plans in place for those ‘what if’ situations. He has counselled his children to live within their means and if they take on debt, make sure they have adequate insurances in place to cover any unforeseen incidents.

Money can make sane people do insane things. Ken’s firm acted for a few clients who invested in Bernie Madoff’s Ponzi scheme. He said they were angry and ashamed of being duped by Madoff’s ‘guaranteed, high return’ offer. Ken said the clients possessed a better-than-average level of financial literacy. Yet, they fell for the con. Sane people can do stupid things when dollar signs impair their sight. If you don’t understand it, don’t do it.

Invest in good advice. Taking shortcuts with legal, tax, and financial advice is false economy. Sound advice is money well spent. If in doubt, seek a second opinion.

In the end, if you disregard good advice, then it’s highly probable you’ll end up with a bad outcome.

While most of this advice reinforces what we already know, I think the reason it has stuck with me is because of the way the stories were told.

And therein lies the final piece of advice.

If you are going to pass on good advice, deliver it in such way it cannot be ignored.

Regards,

Vern Gowdie,
Editor, The Rum Rebellion

Vern is also the Editor of The Gowdie Letter and The Gowdie Advisory — investment services designed to help everyday Australians avoid the financial pitfalls of a volatile economy and make informed decisions to grow their wealth for generations to come.