During the cold-calling days of the past, we used to have a great line for the sucker on the other end of the phone: “Hey, Wall Street has better ideas than Main Street.” Meaning, your local schmuck broker had yesterday’s trade. It was a fair assertion, too. At my wire house firm, we had all the pitches for whatever story was selling weeks before some local yokel got it from his manager in Ohio.

Today, stockbrokers have been transformed into financial advisors and Wall Street is no longer a place you want to talk up. So how do modern financial advisors discredit the competition?


We get personal.

Most investors can’t read a U4 or even know what that is, so doing a basic broker check at FINRA will sometimes yield pay dirt. Since the states are more screwed up than Wall Street, guys who sell insurance long enough will invariably have some minor infraction on state licensing. Also, many independent investment advisors will have a nick on their record when they quit a wirehouse to go out on their own. FINRA’s citation may say the person violated internal policy, which is another way of saying he plotted to go independent without alerting his manager.

If the U4 comes out clean, attack your competitor’s philosophy.

For example, you might mention that your rival is a “DFA shop.” That’s Dimensional Fund Advisors, a cocky index fund distributor that preaches passive investing. DFA lists Robert C. Merton, Nobel laureate, on its home page as a “resident scientist.” You know—Robert “Long-Term Capital Market” Merton. Is that a cheap shot? I don’t think so.

Then again, maybe you’re the DFA shop. Not to worry: You’re far from defenseless. Mention that the other guy is an “active manager” or a “stock picker.” Doesn’t everyone know that most funds can’t beat their benchmark?


In both cases, make sure that, regardless of your position, you have tons of academic research to show people. Don’t worry—they’ll never read it.

Here’s another strategy: Attack their firm.

Every relevant study I read says that investors want an advisor who is wise, but not too old. They want a firm that is big enough, but not too big. They want social proof, but are reluctant to refer their peers.

If you can’t blow someone out of the water for being too old or too young, too small or too big, with clients whom you just can’t respect, go find something they said 20 years ago and suggest that it’s current manifesto. Exploit their old ideas as proof they had it wrong in the past. Harry Markowitz created a computerized arbitrage hedge fund. Warren Buffett said people should invest in index funds. Get in the ring.

Here’s a real example of how we eat our heroes. Jack Bogle is one of the most important figures in finance. Don’t even try to deny it. Yet we don’t want to give him credit for anything. OK, the DFA-ers give him props for founding Vanguard, but are quick to say that their index funds are far superior (that’s why they’re more expensive). DFA has made billions in profit over the years and founder David Booth donated $300 million to the University of Chicago. Jack isn’t even worth $50 million! Who would you trust to make you money, the rich guy or a man working to help the masses?

In the end, financial advice is a business, and Jack committed the cardinal sin: He created a firm that pays its profits back to the shareholders. So we secretly put our children’s custodial accounts in Vanguard index funds while spinning a tale, active or passive, that justifies our existence. We sit in silence as the world pays back a legend with faint praise. And you ask why so many in our industry act badly? Because it pays.