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FAs Can Tell Clients to Take a Page from Warren Buffett

March 6, 2017

Financial advisors talking to clients about their investment methodology could take a cue from Warren Buffett. The Oracle of Omaha’s latest annual shareholder letter is full of pearls of wisdom on the benefits of long-term index fund investing, Seeking Alpha writes.

Buffett built Berkshire Hathaway as a long-term investor rather than a stock picker, the web publication writes. He looks for bargains but sticks with his choices rather than actively trading them, Seeking Alpha writes. For most investors, regardless of their wealth, Buffett suggests investing in index funds, according to the web publication.

In his most recent shareholder letter, Buffett stresses the benefit of long-term planning, saying, “Someone is sitting in the shade today because someone planted a tree long ago,” Seeking Alpha writes.

In an equally poetic line, Buffett also warns against undisciplined investing. “Chains of habit are too light to be felt until they are too heavy to be broken,” he writes, according to the web publication.

Buffett also suggests taking small steps that investors can handle, Seeking Alpha writes. “I don’t look to jump over seven-foot bars. I look around for one-foot bars that I can step over.”

Finally, Buffett suggests being proactive about managing risk rather than merely talking about it, according to the web publication. “Predicting rain doesn’t count. Building arks does.”

On the other hand, FAs might want to stay away from certain types of Buffett-like behavior. Last week the Sage was criticized for "old fashioned" behavior when he made what some have labeled a sexist joke during a radio show interview.

He asked the female interviewer if she new the difference between a diplomat and a lady. His answer? If a diplomat says maybe, he means no, but "if a lady says no, she means maybe. And if she says maybe, she means yes. And if she says yes... she’s no lady!"

Buffett might have gotten off lightly for such behavior because he's 86, folksy and controls "an unconscionable amount of money," writes the Financial Times. But less famous financial advisors might not have as much leeway.

By Alex Padalka
  • To read the SeekingAlpha article cited in this story, click here.
  • To read the Financial Times article cited in this story, click here if you have a paid subscription.