Q&A with an investment adviser

Claude Solnik, The Daily Record Newswire

Charles Massimo went from big Wall Street firms to being the CEO of CJM Wealth Management, managing $300 million today. He talked with me about why he left Wall Street and how to best invest with or without an adviser.

What do you see for the market for 2015?

I’ll give you the answer I give to everyone. I cannot predict the future. Nor do I base my investment decisions on the future. I base my investment decisions on a philosophy and discipline proven for decades. That might not be the right answer for you. But that’s the answer I stick to.

Why did you become an investment adviser?

My father worked his whole life as a butcher. He owned his own butcher shop. He entrusted people with his money. When he retired, he had no money. Those people he entrusted his money to did the wrong thing. I saw what happened to my father. And that had a major impact on my life. He met brokers who fed into that and put him in things that were incredibly risky like commodities and options. He got bad advice.

What was Wall Street like and why did you leave?

My first experience was as a compliance analyst, learning to do it the right way. I realized I wanted to be advising people. I got into the two-year Merrill Lynch training program. I learned a lot, but mostly how to sell product and make profit for Merrill Lynch. We were incentivized to sell Merrill Lynch product before any other product, whether it was right for the client or not.

Was it difficult to leave?

I went from Merrill Lynch to Smith Barney. It wasn’t that different. In 2003 I decided to leave Smith Barney. Was it ethically difficult? No. Financially, it was. I had triplets and two were diagnosed with autism. But I had a real belief I could do things for my clients better than what Wall Street was teaching me to do.

What do you do that’s different?

I did a lot of reading and research on how to build portfolios and the right things to do for clients. There are only three things that matter to be a successful investor. It’s how well you do those things.

And those are?

Part of it is how well you diversify your portfolio. Our portfolio is 13,000 stocks in 26 countries. Not one stock makes up more than 1 percent of the entire portfolio. My first job is to manage risk. The second part is how well you allocate assets. And the third thing is how much you pay for your investments. If you do those three very well, you’ll have a much better experience than 99 percent of your peers.

How do investors find out about “hidden fees” for investments?

Ask the advisers recommending the investment their motivation to recommend that investment. How much are they getting paid? I want to see the full disclosure. Not the prospectus. I want you to tell me and lay out all the fees in this mutual fund.

How do you know you can trust an adviser?

You want to look at how long this person has been in the industry. How many clients do you work with? I want to see what a real statement looks like. Who’s your custodian? Am I writing a check to you or a larger institution? When a person comes to us, we don’t take hold of any money. It goes to our custodian. With Madoff, you wrote out a check to him.

How has Madoff changed investing?

If nothing else, it makes us a lot more transparent. It makes clients ask different questions. They want to see how much they pay for investments, that investments are liquid on a daily basis. So if I call you today, I’ll have my money tomorrow. I want to know my investments are freely traded on the open market. They aren’t private investments that I can’t look up in the newspaper.

What does it take to be a successful investor?

The one thing it doesn’t take is being a good stock picker. That’s probably the biggest myth on Wall Street. That’s the furthest thing from the truth. Some people pick a good stock every once in a while. The most successful investors buy broadly diversified index funds.

Why can’t I just invest my money directly?

You absolutely can. Most investors can’t follow a discipline. They let their emotions carry their investment decisions instead of logic and discipline.