Several weeks ago we wrote to a gentleman who was going through the process of evaluating various investment managers for family trusts as he had determined he was going to make a change from his present investment adviser. He had had considerable experience with investing as he had formerly been a member of the New York Stock Exchange where he was a partner in a specialist firm and had worked on the Floor of the Exchange.

The following, which we would like to share with you, is from our letter to him:

I thought I would write down several of the factors (not necessarily in order of importance) which would be significant if I were choosing an investment advisor.

My thought processes would be similar to those I would use if I were to choose a brain surgeon because the bottom line, after all, is the competence of the person performing the work.

In addition to professional competence and experience, I would want someone who is honest (i.e. no glitz, no hyperbole), someone to whom I could relate and someone who would be accessible and respond to me as a human being as opposed to just another number.

I know of no other business or industry which has so many specialties and sub‑specialties. Therefore, for example, while there may exist a genius who specializes in “Third World” stocks, I would avoid him unless my interests were in “Third World” countries and their emerging stock markets.

In the investment field I would want someone whose interests and competence match up with my objectives. As you well know, the “investment industry” is very, very large and extremely fragmented. I believe that in large part it is this fragmentation which leads to the confusion and difficulties so many intelligent people have when attempting to make choices.

It has been my experience in over 40 years in “Wall Street” that larger is not necessarily better. This is true with virtually all large brokerage and investment management firms including law firms and accounting firms.

The larger the firm the more it has to be involved in marketing in order to pay its overhead. Typically the prospective client meets with senior people, and he is told of the firm’s vast capabilities by experts who know what he wants to hear. He signs on, and it is only a matter of time until his account drifts and is handled by persons who are far from the top. While this happens, the marketing people repeat the process hoping new clients will outnumber departing clients.

Every bank trust department I can think of provides an excellent example of this illustration.

Finally, I think some of the key words in making your choice are: professional competence and integrity, accessibility, investment philosophy and style which match your goals, and personal attention.

The premise with which we begin is that if the client is properly served, the rest will take care of itself.

John, W. Hamilton
January 18th, 2000