The 5 Essentials for Smart Investing: “Know what you know and know what you don’t know” with… (2024)

Know what you know and know what you don’t know. In areas of less knowledge or experience, seek out an expert who can assist. A person may have a strong understanding of growth investments but has no experience with interest sensitive fixed income securites. Buying bonds, for instance, might prove to be very risky. Become familiar (not necessarily expert) with each of the following categories: how much cash is needed in ready reserve; how much insurance is adequate and not too much; am I debt free or on may way; am I investing according to need or greed; am I paying too much in taxes and if so, how can I minimize my legal obligations; is my estate in order relative to titling of assets; benficiary designations and will directives; and, have I fully considered my retirement? One need not be expert in these seven matters but certainly should have a cursory appreciation for each topic.

As a part of my series about the The 5 Essentials of Smart Investing, I had the pleasure of interviewing William M. Francavilla is a Certified Financial Planner ® with more than thirty years of experience in the financial services industry. He has worked as an investment advisor and professional trainer for several Fortune 500 companies, and retired from Legg Mason as senior vice president and director of corporate wealth management. Francavilla currently is a consultant to some of the most successful financial advisors and financial firms in the country. He speaks and writes to help clients and advisors better understand how best to succeed. His book, The Madoffs Among Us: Combat The Scammers, Con Artists and Thieves Who Are Plotting To Steal Your Money (CareerPress, 2018) is highly acclaimed by leaders in the financial industry.

Thank you for doing this with us! Our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?

Early in my career I knew I wanted to be a part of the business world. I opened and ran restaurants in my twenties and thirties but became bored very quickly. That’s when I realized that the fun for me was the capitalizing of these ventures, and not running the day to day operations. So I transitioned to financial services as an advisor building my assets under management to over $400 million. Having studied psychology in college actually helped me as an advisor because I think I was sensitive to client’s most basic financial and emotional needs. I developed an “active listening” course for financial professionals and taught thousands of people how best to serve clients.

Can you share with our readers the most interesting or amusing story that happened to you in your career so far? Can you share the lesson or take away you took out of that story?

Yes, one day I met a woman who asked me if I might help her with her wealth management. Of course I agreed and came to find out that she was the wife of a recently retired Chairman and CEO of a Fortune 500 company. Their net worth was considerable and I presumed that their financial affairs were in good stead. I came to understand that she and her husband were actually quite novice and that his “advisor” was a penny stock or pink sheet broker with wild speculation. I was able to steer them in a far more appropriate direction with an eye on capital preservation. It taught me that one should never presume anything about a family’s financial condition and that even with this gentleman’s great accomplishments, his area of expertise was not personal finance.

Are you working on any exciting new projects now? How do you think that will help people?

One of the most controversial areas of the financial services business today is holding advisors to standards. We have always been governed by the “prudent man rule” that states we are to make recommendations that are “suitable” for the investor. Current legislation has elevated the suitability standard to that of “best interest.” Literally, is the recommendation in the client’s best interest vs just being suitable. This is an important initiative because it also includes a higher degree of transparency. It also gives the client more legal recourse in the event the advisor violates best interest. So I’ve developed a training program designed to educate and encourage advisors to fully consider the daunting responsibilites they have and to build their business with integrity. If I can convince advisors that the consequences of not acting in this manner is not only dishonest but also illegal and provide them with tools whereby they can build a solid platform for their professional growth, I believe I will have not only served the advisor but more importantly, their respective clientele.

Ok. Thanks for all that. Let’s now jump to the main core of our interview. According to this report in Fortune, nearly two-thirds of Americans can’t pass a basic test of financial literacy. In your opinion or experience what is the cause of these unfortunate numbers?

Witness my CEO client and his family referenced above. This does not surprise me in the least. The causes are two fold. First, too many people simply abdicate their responsibility to take an active role. This may be because they think the the information is too daunting or they simply lack the time and interest to educate themselves. Secondly, the industry makes it too difficult for most people to understand. The jargon and vernacular that advisors use may be clear to industry personnel but absolutely not to most Americans. Personal finance does not need to be confusing. I sometimes think it’s even intentional to prove just how smart financial advisors are and even to dissuade people from doing it themselves.

If you had the power to make a change, what 3 things would you recommend to improve these numbers?

1. Insist that advisors listen very carefully to each client in order to determine what solutions are indeed in their best interest and suit their personal needs.

2. Make certain that clients fully understand what they own, how expenses play a role in performance and have a high degree of comfort in this knowledge.

3. Communicate frequently with each other even if there are no changes necessary for a portfolio. It is often in these more casual encounters that an advisor gets to know the real client and conversely, the client gains an appreciation for the advisor.

Ok, thank you! Now to the main question of our interview: You are a “finance insider”. If you had to advise your adult child about 5 non intuitive essentials for smart Investing what would you say? Can you please give a story or an example for each.

1. Know what you know and know what you don’t know. In areas of less knowledge or experience, seek out an expert who can assist. A person may have a strong understanding of growth investments but has no experience with interest sensitive fixed income securites. Buying bonds, for instance, might prove to be very risky. Become familiar (not necessarily expert) with each of the following categories: how much cash is needed in ready reserve; how much insurance is adequate and not too much; am I debt free or on may way; am I investing according to need or greed; am I paying too much in taxes and if so, how can I minimize my legal obligations; is my estate in order relative to titling of assets; benficiary designations and will directives; and, have I fully considered my retirement? One need not be expert in these seven matters but certainly should have a cursory appreciation for each topic.

2. If you find a need to engage an advisor, don’t rely on a referral from a friend or relative. Reference broker.com, a FINRA data bank that will tell you about the advisor’s regulatory history. If any disclaimers are on the advisor’s record, approach with caution. One or two disclaimers, you might ask the advisor to explain. Any more than two begins to be suspicious and you might look elsewhere.

3. Avoid the following three advisors… the novice, the “sales guy” and the very strongly opinionated. Very few of these individuals have your best interest at heart. I want someone who can help solve problems and not someone who wants to sell me something. And because we all started as novices, the exception to this person is when he or she works with a more experienced individual who can approve any recommendations.

4. Ask the following questions of a prospective advisor (or current advisor): Tell me about your experience in financial services. Do you have any industry credentials? Tell me about your approach. Do you buy and sell stocks or are you a more conprehensive financial planner; Will I be working with you or with someone else on your team and how often will we communicate? How do you charge? Is it fee only, fee based or commission?

5. Am I comfortable with my advisor and is my spouse or partner also comfortable? One of us will predecease so let’s make certain we both like this person (if a couple is involved).

Noteworthy… a study by the Certified Planner Board of Standards in 2012 exposed the following: 74% of investors may have purchased unsuitable products; 58% of advisors omitted important facts; 48% may have misrepresented an investment; 46% are guilty of negligence or lack of follow up; and 19% committed fraud with intent or lying.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?

Easy question for me. Jim Brinkley who served as President of Legg Mason’s retail division not only encouraged his advisors to always be honest but also to care more for theirclient’s money than they do. A tremendous leader in the industry, a man who made a significant difference in the lives of thousands of advisors and countless thousands of investors.

Every business day Jim had a list of advisors who were celebrating their anniversary with Legg Mason. He personally called each person congratulating them and thanking them for their service.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

“The greatest leaders are the greatest servants.” From Matthew 23;11–12

If we truly have our client’s best interest at heart by taking the time to listen to their most personal needs and goals and then providing intelligent and well considered solutions, we have succeeded as advisors. A good day for me was solving a financial problem for a person and having that person thank me.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. :-)

Stop talking and start listening. People would grow in mutual respect and esteem if they truly made an effort to hear what the other person is saying. Financial advisors, business leaders, politicians, friends, married couples, families and even leaders of sovereign nations just might walk away from more conversations with renewed enthusiasm for their relationship and foster a spirit of enhanced cooperation and understanding. We just might make our world a better place.

Thank you for the interview. We wish you continued success!

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About The Author:

Jason Hartman is the Founder and CEO of Platinum Properties Investor Network, The Hartman Media Company and The Jason Hartman Foundation. Jason has been involved in several thousand real estate transactions and has owned income properties in 11 states and 17 cities. His company, Platinum Properties Investor Network, Inc. helps people achieve The American Dream of financial freedom by purchasing income property in prudent markets nationwide. Jason’s Complete Solution for Real Estate Investors™ is a comprehensive system providing real estate investors with education, research, resources and technology to deal with all areas of their income property investment needs. Jason’s highly sought after educational events, speaking engagements, and his ultra-hot “Creating Wealth Podcast” inspire and empower hundreds of thousands of people in 164 countries worldwide. While running his successful real estate and media businesses, Jason also believes that giving back to the community plays an important role in building strong personal relationships. He established The Jason Hartman Foundation in 2005 to provide financial literacy education to young adults providing the all important real world skills not taught in school which are the key to the financial stability and success of future generations. We’re in a global monetary crisis caused by decades of misguided policies and the cycle of financial dependence has to be broken, literacy and self-reliance are a good start.