Curt Fowler

“It’s a proprietary strategy. I can’t go into it in great detail.” – Bernie Madoff

I love reading about finance and investing. My first job out of college was with the Private Wealth Division of Arthur Andersen – working with clients like Shaw Carpets and SunTrust Bank. When they hired me, I said I wanted to work with small businesses. They said this is the smallest we got!

It was a great learning experience. We took care of our clients’ businesses and the investment work for their portfolios. Even way back in the late ’90s, we used a passive investment strategy (don’t try to beat the market). Passive investing was not near as popular back then as it is today with Vanguard having some of the largest funds in the world. 

A buddy of mine had this book on his shelf – “Backstage Wall Street” by Joshua Brown. I was dying to know what the “backstage” of Wall Street was like so I picked up a copy. Here are some of the things I learned that I hope you find helpful in your investing journey. 

Who is Joshua Brown and should you listen to him? Joshua is a New York-based financial advisor and CEO of Ritholtz Wealth Management. He has written a couple of books, has a top-rated blog at www.thereformedbroker.com, a podcast, a show on CNBC and appears to have been featured on most major media outlets. It looks like the market thinks the guy is credible, so let’s see what he says in this book. 

The People

Joshua goes into great detail on how he started in the business back in 1996 and how he learned to close “anyone” using what is known in the industry as the Straight Line Pitch. It’s pretty funny to see the scripts for the Straight Line Pitch, so I recommend Googling it for entertainment and to make sure you recognize the pitch if you ever get it. I hope people don’t use it anymore. If you buy the book, Joshua goes into detail on the pitch in Chapter 20. 

One very interesting point made in the book was that cold-calling brokers would avoid pitching to women. The brokers had found that it was nearly impossible to impulse-sell securities to women as they tend to invest for financial security more than bragging rights!

The Products

In the Product section of the book, Joshua goes into great detail on how investment products are sold to brokers. They are some pretty hilarious stories mainly featuring highly determined salespeople with Brooklyn accents. 

Joshua goes on to look at the “streaks” of those who were considered some of the greatest investors of our time. Peter Lynch was one of the few that got out of the market with his streak intact. He profiles several other managers that had tremendous streaks that they could not sustain. 

Josh states that most bad investments products are either volatile or illiquid. They are sold by brokers because they have high commissions. Be careful of products that have these characteristics. 

The Pitch

My favorite part of this section of the book is the details of the Straight Line Pitch in chapter 20 complete with common objections and the broker’s trained rebuttals.

The section on stories is also very good. We have all fallen prey to popular stories that drive market or segment bubbles that burn too many investors. From the internet bubble to real estate and oil. All have seen bubbles and will again. Be careful about buying into trends. 

The Promise

Joshua starts this section of the book with a list of what he calls “murder holes.” These are investments that are more likely than any other to divorce you from your hard-earned money. Here are some of the murder-holes that caught my attention: SPACs (Special Purpose Acquisition Corporations), Chinese Reverse Mergers, One-Drug Biotechs and Private Placements. 

He goes on to mention oil & gas limited partnerships, principal protection funds, insurance brokers selling asset management, stockbrokers selling guaranteed-return equity-linked annuities, reverse convertibles, anyone who claims to have a system (because there is no such thing), anyone who calls themselves a financier, advisors who self-clear or self-custody client funds, currency brokers, managed future funds, movie investments and closed-end IPOs. 

Thankfully, I have never invested in any of these and don’t know what most of them are. If you get pitched any of these, be careful. 

Closing

Here’s what I take from this book and my years of reading on the subject. Wall Street is a less scary place than it was when Joshua started in the business, but there are plenty of traps for the average investor who knows a ton about what they do for a living, but little about the investment markets. 

Invest with someone you trust, someone who can clearly explain to you how they get paid. Don’t attempt to beat the market or pay someone else to do it for you. Odds are you will fail. Buy the market at the lowest cost possible, set an asset allocation and focus on the work God has given you (probably not managing your investments). 

“When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.” – Warren Buffett

We love helping leaders build great companies and we’ve got some great free resources for you in our resource library. You can check them out here –www.valuesdrivenresults.com/resource-library/ or give us a call at (229) 244-1559. We’d love to help you in any way we can. 

Curt Fowler is president of Fowler & Company and director at Fowler, Holley, Rambo & Stalvey. 

Curt and the team at FHRS help leaders build great companies through Virtual CFO, strategy, tax and accounting services. 

Curt is a syndicated business writer, keynote speaker, and business advisor. He has an MBA in strategy and entrepreneurship from the Kellogg School, is a CPA, and a pretty good guy as defined by his wife and five children. (Welcome Baby Owen – June 2021!)