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It pays to ask questions in the world of finance


Tuesday, December 15th, 2015

When I was a kid I was always curious what my dad did for his job. I knew he worked as a “financial advisor,” but I had no idea what that meant or what finance even was.

When I was 16 years old I started working for my dad at Wilsey Asset Management; I would do small jobs around the office but primarily learned how to better understand financial statements and how to properly invest money.

When I was 18 years old I opened my own brokerage account and began to invest using the knowledge I had gathered from my dad. At this time I also began attending the University of San Diego (USD) to get my bachelor’s degree in Finance. I ended up transferring to Northern Arizona University (NAU) and obtained my bachelor’s degree in finance in May of 2015.

After attending both NAU and USD, I realized what my dad had built in Wilsey Asset Management, and how unique it truly was.

In college I was taught about the topics of asset allocation, risk tolerance, mutual funds, and many other topics I had never learned before. I began to question the topics we were discussing, as they made little sense to me. I began to realize the definition of “financial advisor” I had learned from dad was much different from the definition in the college textbooks.

Asset allocation is the idea that you diversify your assets into various asset classes such as bonds and equities (stocks). Traditionally, people may hold 60% stocks and 40% bonds. Typical brokers and financial advisors will tell you as your time horizon shrinks you should invest more money in bonds and less money in stocks. This didn’t make sense to me; right now you are getting a low yield on bonds.

We also know that the Fed will be raising interest rates and as bond yields increase, the price on your bond will decrease. Why would it be a good investment to buy something that you know will decrease in value? Here at Wilsey Asset Management, we will invest in bonds when we see them as a good investment, not because asset allocation tells you to do so.

It is conventional wisdom that everyone has a different time horizon, so they should have a different allocation of stocks and bonds. If you ask a financial advisor how they’re invested compared to you, they will say it’s different because we have a different risk tolerance due to having different time horizons.

At the end of the day, investors should have one goal and that is to make money on their investments. At Wilsey Asset Management we invest everyone’s portfolio the same as we do for myself and my dad, because at the end of the day we all want to make money.

We do encourage investors to ask their current financial person how they’re investing their own money. If that differs from their clients, we think that signals a red flag. It makes me think of the old saying, “Do as I say, not as I do.” I have always been skeptical of this phrase as I am a firm believer in leading by example.

I have learned that this idea of asset allocation is much easier to sell to people. It’s easy to tell people how risky stocks are and how they need to be diversified in stocks and bonds. But when I look at statements of new clients’ portfolios, all asset allocation is telling me is that those investors have no idea what they are truly invested in.

I’ll see many different stocks in the portfolio, some bond funds in the portfolio, and then many different mutual funds. There is no way the financial advisor can truly have a solid understanding of all the positions in the portfolio. They are just hoping that one of those positions might hit it big.

When we invest in a company at Wilsey Asset Management make sure to have a strong understanding of the company and their financials. We will be able to provide many reasons why we like the company and tell you about their balance sheet, income statement, and cash flow statement.

If a financial advisor can’t provide reasons behind why they bought something other than “it’s a hot stock” or “they have a great product, “that should be concerning. Also, if they have no idea what the financial statements look like then they should not be investing in it. It is important for us to educate our clients and make sure they have an understanding of why we buy the companies we do.

With it being the holiday season, I wanted to write this article and say I am thankful for my dad and grateful for everything he has taught me when it comes to the world of investing.

Do you have a question or a company you would like us to take a look at?
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