The pressure had been building for weeks. And it all came to a head last Thursday. I was sure Sarita and I were about to lose our long-time investment advisor. In fact, I went into my meeting with him sure this would be our last meeting together. And I was totally–totally–bummed. It was the culmination of growing distrust between our advisors.

Why had things come to this point?

Almost from the start, when we hired our new legacy planners, they kept making critical or questioning comments about our investment advisor. Internally, I would cringe at every one. “I would really appreciate it if you wouldn’t say anything until you’ve had a chance to talk with him.”

So, finally, on Friday, October 24th, I got all three advisors together in one room, along with Sarita, so that S____, our investment advisor, could present his story.

And so he presented. And he presented well.

After about an hour, he was finished, and he asked, “Any more questions? . . .” He looked searchingly around the room. Everyone indicated they were satisfied with his presentation. “No questions?” he asked again.

No. No more questions. So he packed up his things, said goodbye, and took his leave.

The rest of us remained in the room. (He had joined us for a meeting we had already scheduled.)

The moment S_____ was out the door, however, one of the legacy planners said, “I don’t think he gave us the complete story. . . .” –And he then went on to enumerate concerns he had about S____’s presentation.

And then Sarita raised some questions.

And so, the next day, Saturday, I put the finishing touches on–and sent–an email to S____:

S____:

Thanks so much for coming in on Friday morning. I think you favorably impressed M____. J____ expressed some reservations, due to his perception that your answers to some of his questions didn’t accord with his understanding of reality. He said he didn’t want to call your intentions into question. “It is quite possible he [i.e., you] forgot” what happened or were unaware of the reality, BUT . . .

As I recall, he mentioned three things that concerned him about what you told us.

1. You said you would not purchase an annuity that charged/charges redemption fees. But he got an illustration from the insurance company [whoever provides the annuity we own] and it shows a redemption fee at this time of over $10,000.
    
2. You said that the Morningstar illustration of our investment plan’s returns reflected a fully discounted NET return on investment. He said that, unless something has changed in the very recent past, he didn’t believe it could possibly reflect a fully discounted NET return because, as far as he knows, it is impossible to get Morningstar to report returns “after fees.” He said he wanted to withhold judgment, but he was doubting your answer fully jibed with the facts.
    
3. Something about your answer to his 12(b)1 fees question.

Sarita, too, mentioned she was dismayed by (what she perceived as) your backpedaling concerning the investment of equity from one’s home. ” I had never heard S_____ make any cautionary statements before. . . . In fact, I thought the dinner at Maggiano’s where we heard him speak about the strategy was pretty much wide-open to all his clients. . . . That is certainly where [our daughter and son-in-law] got the idea from, and it was because of my lack of sense that there was any need to really question the strategy that we encouraged the kids to take out interest-only loans on their homes. . . . And hasn’t he said there are a lot of people who would wish they had not paid off their homes, but would have borrowed a substantial portion of their equity so they would have money to invest? . . . I mean, the illustration of the couple that has their $500,000 home paid off but little cash as they head toward retirement. . . .”

Oh. There is one more thing. And this, too, was raised by J____: he said he didn’t think you were so different than many other investment advisors in doing this, but: it disturbs him to see the majority of our [large] cash [account] sitting in a 1.x percent money market when, at the same time, there are other money market funds paying well over 3%. “A lot of investment advisors are so excited about maximizing investment returns, that they ignore returns on cash itself,” he said.

And then Sarita, too, said that bothered her as well: “Here we are paying 6% (or whatever) on borrowing those funds, and we are losing, say, 2% of simple interest?”

*******

Please know that I mention all these things more by way of FYI than out of alarm. I expect you will have good answers. But I’ll leave the answers for another day.

The following Monday morning, early, S____ replied:

John:

It is a shame that we could not have discussed these issues at our meeting. However, I will prepare a response that you can forward to Sarita and your legacy planners. Please allow a day or two as my schedule is really booked today and Tuesday.

Thanks.

And I replied:

Thanks, S_____. I’ll look forward to your responses to Sarita’s and the planners’ concerns.

Just a thought or two about why we did not discuss these matters at the time.

I know Sarita often takes quite a bit of time to “process” her thoughts before she is able or willing to talk about things–with me as much as anyone else, and whether a matter is “difficult” or “easy,” emotional or unemotional. It “just” takes her time. . . .

As for the planners: I’m not sure what to say. Personally, I prefer to “lay everything out on the table,” and, just prior to your entry to the room, not having any idea what would really be discussed, I specifically asked them to speak up and lay things out. I urged them to avoid starting from (what I had already begun to perceive as) an apparent general prejudice against investment advisors. (I imagine you “saw” or “heard” some of that prejudice for yourself while you were there.) They “just” don’t have a very high view of [most] investment advisors. . . . Which was/is why I said what I did about how it appeared to me that you favorably impressed M____. . . . My guess: J_____ wanted to ask you his questions, but he didn’t know how to express them graciously or politely or something. . . .

Anyway. FWIW.

Tuesday afternoon, then, I received a copy of a letter from J____ to S____:

Hi S____.

We appreciate your time last Friday. Thanks again.

There are a few items we would like to request from you so that we have a thorough “investment file” for the Holzmann’s. These include:

- Copies of the most recent investment/insurance statements (including corporate/partnership/foundation statements).

- Last investment policy statement signed by the Holzmann’s

- Form ADV

- Performance history of all Holzmann’s accounts since inception

- Fee schedule that applies to the Holzmann’s

- Slide show of the presentation you gave on Friday

Hopefully this is not too cumbersome. We appreciate the assistance!

Thanks much.

J____

And S_____ wrote back just a few hours later:

J____:

We will be happy to provide this information and will update it quarterly. Let me know if you have further questions.

But two and a half weeks later, on Saturday, November 15, I had received no answers to any of my questions. And I knew S_____ had never sent any of the information he had promised to send in reply to J_____’s specific request. So I sent him a detailed reminder of everything everyone had written to one another and concluded,

[W]hen we met [for our regular monthly meeting] on Wednesday [November 12], I asked you about this and you said you all are “working on it.”

I know you all are busy but I want to make sure J____ receives what he requested no later than Tuesday (the 18th). Maybe I have no idea what I’m talking about, but it seems to me that three to four weeks ought to be considered too long to have to wait for an answer to a request of this nature. What really bothers me: that J____ and/or M____ might soon urge Sarita and me to find a new investment advisor and we would have no legitimate response to any stated concerns they may have about your firm’s failure to answer a legitimate information request within a reasonable time frame!

I really don’t want to give them that excuse!

Thanks so much.

John

PS: I have not heard anything else from either J____ or M____ besides what I have written above. But it does scare me that they may contact me shortly–maybe even on Monday–and I will have no good answer. Please help me!

Monday morning, I received a phone call from M____ and J____, and I wrote to S____:

S____:

M____ & J____ called this morning to say they hadn’t heard from you and to ask if I might intercede with you in their behalf. I told them I had actually just sent you an email about it.

Can you please get on this for me (and them)?

THANKS!

I received a reply a few minutes later:

John:

The information they requested will be provided this week. Active client issues and our money management activities have taken priority over the past few weeks. I have dedicated the resources to complete this project this week.

S____

But it didn’t happen that week. And the week after was Thanksgiving. And our family was out of town.

On Saturday, November 29th–five weeks after my initial email, S____ finally wrote:

John:

I have the data prepared to forward to your legacy planning firm as well as the data related to the questions from our previous meeting. Let me know when you have time to review the information.

I hope you had a nice family vacation.

S_____

I called on Monday. His secretary said, “Can you come in to talk with S____ about it tomorrow (Tuesday)?”

“Sure!” I said.

And so we set an appointment.

But a few hours later I got a call back: “That time won’t work. He’s got another appointment at that time. . . . How about Thursday (December 4th)?”

“That’s fine. But . . . I’ve got to tell you: This is becoming highly frustrating. It’s crazy that I should have to wait this long to receive this kind of information . . . information that should be pretty much ‘at your fingertips’!

“I am happy to talk with S____ at any time, but could he simply forward me the information so I can pass it along to our legacy planners? I mean, this is getting ridiculous! It’s been almost six weeks since I first wrote S____ about these things. . . .”

******

Wednesday morning I received an email from S____; it included two PDF reports and a request to “review the attached documents so we can determine when we meet tomorrow the type of consolidated reporting that will meet your needs.”

I forwarded them immediately to the legacy planners:

I have not opened the attached documents. I think you might be in a better position [than I am] to guide me on how to read them and how to interact with S____ tomorrow

Late that afternoon, I received a reply:

We want to be very careful to honor your relationship with S____ and to not make premature judgments. However, the information provided by S____ (to you) and forwarded to us is not what we asked for, nor is it helpful in determining the specifics of your particular investment accounts, or in doing any useful analysis. . . .

M____ continued with some stronger words, but let me quote them–as I did–in the email I sent about an hour later to S____. –I think you’ll see why I figured our relationship would likely be over.

S____:

I forwarded your reports to M____ and J____ with the following note:

Gentlemen:

I have not opened the attached documents. I think you might be in a better position [than I am] to guide me on how to read them and how to interact with S____ tomorrow. . . .

M____ just replied:

We want to be very careful to honor your relationship with S____ . . .

To date, we have received none of the requested items. This information should be readily available and at S____’s “finger tips”. I know the markets have kept S____ busy, but it has been more than 5 weeks since the request. We anticipated that this would be the package S____ sent you, but this is not the case.

John, we believe in having a collegial relationship with all of our client’s other advisors. We know that you asked S____ to cooperate with us in sending the requested information. One of the tenets of such a relationship is open and thorough communication between advisors. We have concerns when we request information (especially when there is an indication that the information will be forthcoming) from any advisor and then receive incomplete or inaccurate information.

Following are our initial observations about the material provided:

1. We did not receive a copy of the slide show S____ showed us during his presentation.
2. The “hypothetical” portfolio illustration only covers the period from 11-30-1988 to 12-31-2007 (we need an actual performance report on your total portfolio through the current reporting period). [Comment by John: I agree.]
3. The information provided does not include all of the investment accounts S____ is managing for you. [Comment by John: I still haven't looked at what you sent me, S____, BUT . . . I agree that we ought to have actual performance reports for all investment accounts from inception (not before!) to the current reporting period (and not some other time).]
4. There is no performance history relative to all of your accounts.
5. The SEC form ADV requested is not provided.
6. There is no fee schedule for your accounts.
7. There is no “Investment Policy Statement from which to determine the “actual vs. planned” investment strategies that have been followed by S____ and his firm.

We think these are important items to discuss with S____ when you meet with him tomorrow.

I will say, S____, that I have had feelings in the direction that M____ has expressed here. But knowing that he has spoken for himself in these terms, and considering that he is the one who did the asking, and, moreover, you explicitly agreed to provide the information [i.e., therefore, I assume, you agree that the requests are reasonable], let me say that I would expect you to respond specifically to the explicit requests M____ and J____ made.

Let me also add: I would expect you to have full, documented answers for the additional questions I sent your way in which I expressed concerns, as it were, “in behalf of” Sarita and J_____ as mentioned in my October 25^th email to you. [And I then re-quoted both my email to him and his reply in which he asked for "a day or two" to reply.]

S____, here it is, five-weeks-plus since then and I still haven’t received any responses to those concerns or questions, either. And I have reminded you of these requests on more than one occasion. First reminder (in written form!): 11/15 at 10:09 AM, when I mentioned I had awakened at 2 am with these questions (both M____’s and J____’s and the ones I just quoted) on my mind. Indeed, I quoted both their email and mine . . . with the significant questions emboldened for easy reading.

I then wrote a follow-up on Monday the 17th and you promised to provide the information M____ and J____ requested “this week.” Of course, it was the 29th when you said you had the information ready . . . but/and, now, for some reason, what you sent still missed the mark.

As time has dragged on and you have kept promising appropriate replies but not come through . . . I will confess that the questions and concerns of these “others” have begun to become questions and concerns to me.

I look forward to having my questions and concerns finally put to rest tomorrow . . . by having “their” questions and concerns answered directly and completely.

Thank you.

As I said up top, I figured, when I walked in on Thursday, that was going to be the end. The tension had risen too high.

But when he saw me, S____ came right over, big smile on his face, stuck out his hand, and began talking about how our Family Fun Week had gone, how the kids are, and so forth . . . as if absolutely nothing was bothering him . . . or me.

Finally we got down to business.

“John,” he said, “there are at least two things going on, here. First, I have really and truly been buried under the market downturn of the last couple of months. This has been a period of unprecedented turmoil in the marketplace, and I have been spending 14 hours a day, six days a week, just trying to keep up. I have been attending, first, to the current investment needs of my clients–including you–rather than attempting to work with your legacy planning.

“And for the fact that I have failed to come through for you, I am truly sorry. I hope you will forgive me. But I have felt my first duty is to my clients in my fiduciary duties, rather than to preserving some kind of appearance before your legacy planners. . . .”

He then confessed he did not have the data he had promised. “You are looking at close to 400 pages of documentation,” he said. “You have nine accounts with my firm and to get the complete story on each of those accounts takes 30 pages or more of documentation. So what I propose to do for you before our regularly scheduled meeting next week [that's today; this afternoon] is this: I am bringing in an additional person just for you, to make sure we get all those documents produced before our meeting. And I solemnly promise you I will have all the documentation you and your advisors need when you come back next Wednesday.

“I will have it in two forms, one a jump drive and the other a three-ring binder with 300 or 400 pages in it. And you can give either of those to your legacy planners. . . .

“But there is another thing going on, here,” he continued. “And I don’t want to proceed without making this clear. I sense your legacy planners are being disingenuous. They are not being honest with you.”

“!!!???!!!” I looked at him in consternation.

“Look,” he said. “Over the 20 years I have been involved in this business, I have urged probably 20 of my clients to pursue legacy planning. And every time–this always happens–I find myself in the situation where I’m having to defend myself against my clients’ legacy planners–the very people I encouraged them to get in touch with.

“The problem is, the legacy planners offer their services not as a straightforward, neutral means to serve the client. Rather, they offer it as a loss-leader in order to convince you to place your assets under their control.

“And so it is with your legacy planners. They pretend to want to collaborate, but what they are really trying to do is compete. And I find that rather offensive.

“I am happy to collaborate with people who are willing to collaborate with me. I am happy to compete against those who are willing to compete against me openly and honestly. But I don’t like it when people come in saying they want to collaborate with me when the truth is, they want to take my business.”

I asked S____ what led him to conclude that M____ and J____ were attempting to compete and not to collaborate.

“First thing: I went to their website. And the entire focus of their website is on asset management. ‘We have $5 billion under management.’ –That’s what their company is all about. . . . Meanwhile, you won’t find any reference to legacy planning on their site.

“So what do you think? Are they all about legacy planning . . . or are they about seeking to acquire assets to place under management? . . . I think the answer is pretty obvious.

“But beyond that. Look at the questions they are asking. They are not asking prospective questions–questions about the future, the stuff of which legacy plans are made. They’re not saying, for example, ‘We have a 20-year time horizon and need to assume a growth rate. What would you (S____) recommend we use? And how confident are you of that assumption. And why? . . . And what kind of volatility might we expect? . . .’

“Instead, their questions are all about the past. In other words, they are trying to find means by which they can show places I may have messed up so they can sell you on their services. . . .

“But if they are interested in selling you on their services, then I think they should be up-front about it. They should say so: ‘We want to win your business.’ –And then they should let me ask the same kinds of questions of them that they are asking of me. Let’s go head-to-head in an open contest. But none of this skulking around. . . .

“I am happy to have them evaluate me. But let’s be honest about what we are doing.”

Of course, I am only attempting to summarize what S____ told me, but this was the basic message.

At one point I urged him: “Let’s call M____ and J____ and get their perspective.”

“No. I’m not interested. I don’t want to get into an argument with them.”

But before leaving his office, I told S____: “You understand, as soon as I get home, I’m going to contact M____ and J_____ to get their side of the story.”

“That’s fine,” said S____. “Just remember: If they say they are interested in getting your business, that’s fine. And if they can do a better job than me, then I am more than willing to step aside. ‘You win some and you lose some.’ (Though I have to say, I retain close to 99% of all my clients.) But if they say they are not trying to compete, then we will move forward on that basis. But if in another six months or so they begin to try to ask to manager your funds, you will know they were lying when they said that was not their end game.”

“Okay,” I said.

And so I called M____.

“M____,” I said, “I met with S____ this afternoon. I just got through talking with him.

“I think I found out why he hasn’t provided us with the information we’ve been requesting.”

“Oh, yeah?”

“Yes. . . . He thinks you guys have been rather disingenuous.”

“How’s that?”

I tried to explain to M____ what S____ had said to me. I expressed it in words as close to those S____ had used. And I attempted to express it with a similar emotional force.

After about five minutes, M____ said, “Are you willing to let me answer?”

“Of course!”

He said, “First of all, what S____ is suggesting is something we hear all the time. It never fails. A hundred percent of the time. Our clients’ current advisors think we are coming in to take their business away.

“But we’re not. That’s not what we’re about.”

“So why are you asking retrospective rather than prospective questions?” I asked.

M____ urged me to remember what he and J____ had done a few months ago with our legal documents: “We looked them over and analyzed where they were likely to bring you and your children in another 20 years if you left them as-is. We then presented you with what we discovered and asked whether their outcomes matched what you actually want to achieve.

“So it is here. We want to look at what S____ has been doing, analyze if and to what extent S____’s performance matches your (and his) stated goals, and then, make recommendations about possible changes based on what we find.

“Our desire is not to take any business away from S____. Yes, our firm does a lot of asset management. But that is not what we are here for and it is not our purpose or plan to direct business toward our firm’s investment advisors. We charge the high fee we do specifically so that we have no need to try to supplement our income by grabbing additional business in other areas. . . .”

Again, I have significantly shortened the conversation. But I commented to M____ that I thought it was sadly humorous: He and S____, both, had used the same phrase: “This always happens. Without fail.” –Advisors on “the other side” always question, always distrust, always cause problems.

So how do we bring them together?

I guess we, the clients, have to help them communicate openly one with the other.

After talking with M____, then, I went back to S____.

“S____,” I said. “I just talked with M____. He said they absolutely are not interested in competing with you. They do want to collaborate. . . .” And I explained what M____ had said about the retrospective rather than prospective questions.

“Well, then,” he said. “We will move forward under that assumption.”

“M____ said he didn’t need anything close to all the pages of data you said you felt you needed to provide him. He just needs the specific information they asked for.”

“Okay. Then that makes my job immensely easier,” said S____.

I wrote to M____:

I talked with S____. . .

He said, based on what I told him, that he would not burden you with 400 pages.

Perhaps, if you can email him and talk with him on the phone, you can help him even a bit more to understand exactly what would be most helpful.

I thought what he was proposing to send sounded reasonable. But perhaps you can talk with him and reassure both of you that you are on the same page together.

Thanks.

Apparently, before he opened that email, M___ emailed S____ with a copy to me:

Hi S____,

Talked to John yesterday after your meeting. Attached is an illustration of what our engagement is with John and Sarita, and where we are in the process. Please do not view this as “competition”, rather an analysis (part of our normal process) so that we can integrate your processes with the goals of the legacy plan.

We are not competing for investment of the assets. Our engagement is priced (as we always do) to allow us to do the planning without needing to supplement any other services in order to make money. I know other firms often use planning as a loss-leader to get to their real goal. Those “plans” are generally not worth much. We are not doing this.

We really DO NOT want the “400 pages” of analysis John mentioned you were preparing. We only need the stuff we requested. We will follow up, after analyzing the initial data, with targeted questions to help us do the integration (e.g., goals of the specific account, time horizons as you understood them to be when you opened the account(s), benchmarks for each account, variance, etc.) and action items to coordinate the investment management with the plan. Our analysis will conclude with “Observations and Considerations” which will be given to the Holzmanns and to you.

If we feel there are areas that need to be changed to more accurately reflect the goals of the plan, we will so state. If we feel there are concerns such as fees, fund choices, stock picks, bond quality, etc., we will be very up front about it and let you determine how, or if, you might go about modifying the applicable accounts.

Looking forward to getting the requested items. Have a good day.

The key page in the attachment was the following:

When all is said and done, I’m not completely sure what I expect you to take away from this post other than to realize, ultimately, you yourself may have to play a significant intermediary role in the relationships among your advisors! And . . . if called upon to fulfill such a responsibility, don’t shy away from it. The ultimate success or failure of your professional team may rest very much on your ability to keep the team members working together!

I look forward to meeting with S____ later today to receive the answers for which we have been waiting, now, over six weeks. . . .

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