May 18, 2017 | François Sicart
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Financial institutions like to claim that they always put their clients’ interests before their own — or at least on par with them. Real life shows us scant evidence of that claim. Truth be told, it is hard to sustain a money-management firm as a business (rather than as a professional practice, which used to be the model) without running into conflicts between your clients’ interests and your own.

I deeply believe that resolving those conflicts of interest with probity is key           to building a successful practice over time, and I have at least one compelling example to help me remind young colleagues that probity pays.

Last weekend, I learned from one of her sons that one of my oldest clients had passed away. Mrs. B. had followed me with unshakable loyalty and friendship through most of my professional life. The milestones of my career paralleled those of her growing family.

In the 1970s, Mrs. B.’s husband and his family owned a well-known business. Tucker Anthony, which I recently had joined as the Senior Partner’s assistant, managed its pension fund.

Prior to joining Tucker Anthony, my boss had been a partner in a small firm whose three other members had been stock market investors since before the 1930s Great Depression. Those men had not only survived the Depression financially — they had all become quite rich. One of them was Walter Mewing, a great value investor in the Ben Graham tradition, who had initially started as a messenger boy on Wall Street.

Not long after my joining Tucker Anthony, the B. Company entered into an agreement to be acquired by a larger and more aggressive company.

Walter Mewing, by then retired, nevertheless shared with us his concern that the acquiring company might raid the pension fund of the B. Company which, thanks to many years of successful investment, had become significantly over-funded. Such a raid would clearly be to the detriment of the fund’s existing beneficiaries –the company’s employees. On Mr. Mewing’s advice, and with Mr. B’s approval, we at Tucker Anthony decided to liquidate the pension portfolio and buy annuities for each one of the employees.

As a result, we lost one of our largest accounts. But doing the right thing, while financially expensive, proved highly rewarding morally — and eventually financially as well.

We did retain a few, much smaller accounts for the B. family. The friendship and loyalty continued over the years.

Then, in the late 1990s, after declining for more than 15 years, the price of oil started rising in earnest. Unbeknownst to us, Mrs. B.’s. father-in-law had accumulated a large number of small oil royalties – presumably in the 1950s and 1960s. After insignificant payouts during the long years of depressed oil prices, these royalties began to steadily boost the family’s income over the last twenty years.

This allowed Mrs. B., who had become the family’s financial steward even before her husband’s death, to engineer wise patrimonial distributions to her many heirs. By the time she died, she had opened twenty accounts for her children, grand-children and great-grand-children. The family again became one of our large clients.

This episode reinforced my conviction that even in the notorious jungle we call Wall Street, doing the right thing has its rewards. As to Mrs. B., I will never forget her loyalty and friendship, nor the astuteness with which she steered her family’s affairs.

François Sicart

May 16, 2017

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