Stay On the Rails

What do most financial advisors and African/Middle Eastern carpet salesmen have in common? 

A few years ago I took a train from  Algiers, Morocco (a northern city bordering the Mediterranean Sea) to Marrakesh, the famous swash buckling haven for merchants, snake charmers and leather tanners.  If you blindfolded me and transported me (Star Trek style) to the heart of Marrakesh, I’d probably know where I was.  I’d soon feel somebody pulling me by the hand towards something he was selling.  The beautiful, haunted chanting of the mosques would be resonating from crackling loudspeakers, and the snake charmers’ mesmerizing music could be heard as their cobras dance and sway for tourists.
 
What’s more, every time an automobile driver breaths, he honks his horn.  The streets of Morocco aren’t exactly serene.
 
But the train ride from Algiers to Marrakesh certainly can be, until you get a visitor.
 
He’ll be charming, he’ll speak English well, and he’ll insist that you visit his home as a special, honored guest.  In short, he’s a merchant of sorts (likely a carpet salesman) –or at least he’s a middle man for one.  We’re not talking about just one guy who sits down beside tourists and makes the offer to accompany him to his home.  Ask someone who has taken that Moroccan train ride, and they’ll likely confirm my story that somebody tried to befriend them along this route. 
 
Generally, as they did with me, they’ll ask you to get off the train at a town called Asilah.  If you’ve read your Lonely Planet Guide to Morocco ahead of time, you won’t get off the train. 
 
Now, getting off the train at Asilah with your new friend isn’t going to be the end of the world.  You won’t likely get tossed in a tanning pit and sold into slavery.  In fact, the experience can be quite pleasurable.  First off, you’ll be taken to a home and given some wonderful sweet, mint tea.  You might have dinner with the man’s family—what will amount to a wonderful meal of Tagine.  Next, you’ll be taken to a neighbourhood  carpet shop.
 
Now, if you could slip a bit of truth serum into their mint tea, your hosts would have no choice but to tell you the truth.  With glazed eyes, the truth serum would force your new Moroccan friends to come clean:  no sane Moroccan, no matter how rich, would pay the prices that you are being asked for the products they’re hawking.  What’s more, because you aren’t likely a connoisseur of hand made carpets, the merchant (if that’s what they’re selling) isn’t going to sell the very best wares to you.
 
While visiting Marrakesh, I shared a pot of mint tea with an affable merchant named Muhammed Ali (you wouldn’t believe how many Muhammed Ali’s live in Morrocco!)  This gentleman confirmed what I read later, in The Lonely Planet.  Pouring the tea at a traditionally great height from one pot, into another, and then back into the original pot, he smiled and said that Moroccans view Americans as the second most financially gullible people on the planet, just one ranking behind the Japanese.  Canadians rank third. Moroccan merchants, according to Ali, find out where their prospective buyers are from, and then hawk their wares and set their prices accordingly:  higher prices for the Japanese and the Americans, of course.
 
He only laughed when I told him the price I paid for two beautiful looking Moroccan tea pots.  He nearly spilled the tea in hysterics when I told him that neither pot (which I found out later) actually held water without leaking.
 
Now imagine this scenario.  There is a place where wealthy Moroccans buy carpets.  And these places don’t put salesmen on trains.  The wealthy locals buy higher quality products that cost less money than those offered by train salesmen.  But if you’re like most tourists, you’ll never know this.  And if you’re like most American or Canadian investors, you’re metaphorically buying inferior investment products from salesmen on trains.  But they aren’t on trains.  They’re at your local bank and financial service institutions.  A full 95% of American investors buy the more expensive, lower quality investment products—while the remaining 5% put a higher degree of financial literacy to work for them.
 
I don’t buy carpets from salesmen on trains, and neither should you.
 
The trouble is that only a small percentage of everyday people can sit across from a financial advisor and know whether or not they’re on a Moroccan train destined for Asilah’s carpeted rookie tourist trap.   Why is that?  It’s because the average person has no idea what the advisor is talking about half the time.  This isn’t the advisor’s fault.  But it’s not the investor’s fault either.
 
Our educational system does a lousy job at teaching financial literacy.  So when most of us go to a financial institution to choose our investments, we’re met by a sharply dressed man or woman who unwittingly talks circles around us.  We’re sometimes left saying,  “Just do whatever with my money.  Make it grow.  But don’t take big risks.”  Then we leave.  It’s a bit like giving a Moroccan salesman your wallet and asking him to select something you’d like.
 
Did you know that many advisors are faced with their own little conflict of interest dilemmas on a daily basis?  There are investment products that serve you, the investor, and there are investment products that serve your advisor more readily than they serve the investors.  In many cases, advisors can actually receive greater remuneration selling one product over another.  Think of it as a sales perk or extra commission.
 
If you’ve been submissive in the past, putting your trust solely in the arms of your financial planner, then you’ve very likely fallen victim to what interests your advisor first, and you second.  This blog, I hope, will help convince you to avoid the wrong kind of carpet salespeople.
 
Stay on the rails.





Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I’m happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

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3 Responses

  1. Nice post… information is power. I don't go travelling to strange countries without a lonely planet, because I know that the more savvy areas will rip me off badly (on the other hand, there are other less-touristy places where I actually wish the people would charge tourists more, because they could easily do so).

    Until the day where financial education is taught in schools (and I'm not sure that they will do such a good job of it, if the teacher doesn't understand it himself and also since the govt. obviously has a different perspective of this than we do), this will have to be passed down from parent to child or otherwise learned by experience and self-research!

    Blogs like your own are greatly improving the availability of information, and at the same time doing so in a manner which any layman can understand. Great stuff so far!

  2. Andrew Hallam says:

    Thanks for the kind words Kevin.

    It's funny what you say about the Lonely Planet. You're right, it's a great resource. But no matter how much I travel, I always seem to pull one "rookie move" at the beginning of every trip. It always takes me a while to get into the groove. Oh well….as they say in golf, "every putt makes someone happy"

  3. Parag says:

    Absolutely brilliant article. The similarities you pointed out between the Moroccan merchants and financial advisers is something I never thought of. Morocco is a place that is rich in culture and history and yes, colorful decorative carpets.

    You are so true about people's financial literacy (or ignorance). They just want money to grow which is good but how ? One has to be careful about planning their Personal finance as to where they exactly have to invest and and what are their present needs.

    Thanks again for the wonderful article.

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