Road
#4: OPM (Where Most of the Richest Are)
1.
Other
People’s Money (OPM) – money management, private equity, brokerage, banking,
insurance and etc. It is easy entry. It is a fairly reliable road to riches.
2.
A
good OPM Richie efficiently and ethically makes his clients rich at the same
time.
3.
86
of 2007’s Forbes 400 members got there on this road. And more modest piles of
$2 million to $50 million are commonly made, often just a few years.
Guidelines:
4.
Love
capitalism and free markets.
a.
There
is no better system for generating and building societal wealth.
b.
OPMers
operate close to the heart of the capital markets pricing mechanism and die by
competitive forces.
5.
Get
the client.
a.
You
must sell, either by getting referrals or sell directly.
b.
General
rule: learn to sell first and learn finance later.
i.
Learn
to sell as young as possible – the younger you start, the faster and better you
learn. (Benefit:
(1) sales are the key to many roads, and (2) enable you to hire and manage a
sales force.)
ii.
Learn
to analyze investments is like learning to hire people well – years of real
world experience make discernment easier.
c.
Try
whatever methods: direct mail, internet ads, radio, newspaper, TV, call
accountants and estate-planning attorneys who have clients that need your
services and etc.
d.
Type
#1: Commission-based OPMers
– stocks and insurance brokers, mutual funds, and etc.
i.
Process:
Get the client à Sell the products à Get a commission.
ii.
Drawback:
Unless you get the clients to buy what you sold them and buy something new, you
need another slew of clients next year.
e.
Type
#2: Fee-based OPMers –
investment advisors, money managers, or hedge funds.
i.
Process:
Get the client à Keep the clients à Do well for them.
6.
Keep
the clients.
a.
Requirement
#1: Performance.
i.
Set
realistic client expectations and achieve them.
ii.
Under
promise, but over perform.
iii.
Exceeding
client expectations helps keep clients around and keeps clients from doing
something potentially harmful to themselves – like chasing hot markets.
b.
Requirement
#2: Customer services.
i.
The
better and more high-touch your service, the likelier your clients remain.
ii.
Know
your clients and understand their needs.
7.
Don’t
break the law.
a.
Breaking
the law may land you in jail, or lose the customers.
b.
Cheaters
may get rich, but they don’t stay rich.
8.
Focus
on core competencies.
a.
Multiple
skills required – OPMers are salespeople, servicer, trader, marketer,
researcher, manager, leader, CEO, and able to stay abreast of global markets,
economies, with accurate forecasts.
b.
Area
#1: Hedge Fund.
i.
To
get big reward as a hedge fund manager, you must take big risk.
ii.
The
best hedge funders aren’t just lucky – they are skilled.
iii.
Fact:
Few survive 2 years before all their investors redeem and disappear.
iv.
Action:
go to work for a hedge fund (Note that there is no security; a fund cab blow up
fast).
v.
Hedge
funds are lightly regulated, so they’re easy entry. Consult law firms with
hedge fund specialty, they can set up one for you like spitting out popcorn.
vi.
Process:
Betting big à Find clients who will back you in the
bets à adhere to the applicable laws à while you collect 2 plus 20 à be very tough and cool always.
c.
Area
#2: Private Equity.
i.
Take
over troubled publicly traded firms and fix them to later sell at a profit.
ii.
Required
skills: takeover, bring in new management, cut off losing divisions, fund
winning divisions, know how to borrow well, and go public again at higher
prices.
iii.
Idea:
spot troubled firms that can be bought cheaply, because no one else sees
potential, but can be fixed and profits boosted to fat levels compared to
interest costs incurred with the buyout.
iv.
In
fact, just working at these firms isn’t a bad career.
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