Financial advisor

“ Without going into shades of encyclopedic meaning, I would define, for the purpose of this discussion, a financier as a man who has some recognized relation and responsibility toward the larger monetary affairs of the public, either by administering deposits and loaning funds or by being a wholesale or retail distributor of securities.
To all such the confidence of the financial community, which naturally knows them best, and of the investing public is absolutely vital. Without it, they simply cannot live. ”

“ The greater the amounts needed, the greater the need of expert advice and financial aid of the very best quality, because by training and experience bankers know where and how money can be obtained. With proper aid from bankers the officers of the company will not have their attention too much diverted from the work of careful management, safe and efficient operation, and good service to the public. ”

“ With the third method a permanent increase is secured in the capital funds available for use in the business. Financial policy, governed by the needs of the business and its markets, will always dictate the method to be used for extinguishing or contracting a debt. ”

“ You are indebted to that Paris firm for nearly a hundred thousand pounds. They call themselves financial agents, but they are moneylenders of the hardest type. Maitrank is as hard as your diamonds. And he has found you out, Countess. ”

“ Similarly, the basis for the valuation of each of the asset items must be investigated and determined correct before the balance sheet may be considered to represent the true financial condition of the business. It is the experience of every business that it cannot collect all of the credits extended to customers. Regardless of how carefully credit is granted, it will be found that some customers do not pay their debts. ”

“ When, therefore, the bond issue becomes due in a period of financial stringency, or even during normal times if the business has not been highly successful or if its credit has been impaired, the company may be unable to liquidate its assets and pay it off. ”

“ All these various forms of banking are distinct in character and economically the funds of each perform a peculiar function that must be recognized and observed or we shall make a great fundamental error in constructing what we hope will prove a sound financial and banking system. We must provide that the commercial function, the savings function, the trust function shall be kept apart by separating the funds arising from each, and keeping them completely segregated, in order that the country may always know just what its commercial fund is, as distinguished from its investment fund. ”

“ In financial legislation every measure in the direction of greater fidelity in the discharge of pecuniary obligations has been found by experience to diminish the rates of interest which debtors are required to pay and to increase the facility with which money can be obtained for every legitimate purpose. Our own recent financial history shows how surely money becomes abundant whenever confidence in the exact performance of moneyed obligations is established. ”

“ Complicated financial adjustments belong to a lower plane: the great financier may have no aptitude in reducing results to a decimal. But there is this distinction, that whereas in the intricate calculations of secondary finance the figures are mere counters, the elaboration of accepted data, in the higher and simpler finance they are symbols. ”

“ Thus he goes through the lot, commenting on the financial means and willingness to pay of each signer. When he has concluded the doctor gathers up the notes, replaces them in his wallet, chats for a moment about the weather and crop conditions, gives the banker a fine cigar, thanks him heartily for his courtesy, and turns to leave.
Country bankers make the most, if not all of their money by discounting the notes of their neighborhood farmers. They know the financial record of everybody within reaching distance. ”

“ A combination course in engineering and business management is needed also to prepare men for places in banks as investment managers. The banks must advance funds to industrial concerns, and such loans cannot be made wisely save upon the advice of one who is thoroughly acquainted with plant management, equipment, and mechanical operations as well as costs of production and market possibilities. In addition, such a man must be well acquainted with systems of accounting and methods of preparing financial statements. ”

“ You have read the enticing overstatements in your newspapers, financial papers, and company reports, you have listened to professional tipsters, financial wizards, or your bank's financial expert and adviser offering you a lifetime opportunity to purchase investments supposed to pay good interest and dividends. ”

“ Coupons and drawn bonds are payable in sterling at the countinghouse of the issuing firm. The extent of the other information given varies considerably. Some firms rely so far on their own prestige and the credit of those on whose account they offer loans, that they state little more than the bare terms of the issue as given above. Others deign to give details concerning the financial position of the borrowing Government, such as its revenue and expenditure for a term of years, the amount of its outstanding debt, and of its assets if any. ”

“ Is it for the best financial interest of the company to borrow on short or long time, to create a floating or a funded debt, etc.—these points require consideration and can, of course, be answered only in the light of the conditions prevailing in each case as to the status of the working capital requirements. ”

“ As the financial responsibilities of the paper have grown during the past six years, however, it has become apparent that we must not merely publish the paper each year and hope to pay our bills but that we must study the question of financing a growing paper with ever growing needs of expansion and consequent growing financial risks. ”

“ You and 'Livia—you mustn't mind my callin' her that 'cause she's goin' to be one of the family so soon—you'll want to be fussin' with science and such, and you won't have no time to attend to the finances. You'll need a good, safe person to be your financial manager. ”

“ To them the Government turns when funds are needed for internal improvements or when the exchequer faces a deficit. The promoters of street railways, steam railways, steam railroads, and other permanent improvements take counsel with the managers of these chartered banks before they issue their securities. The banks as a rule do not invest their funds in the stocks or bonds of new enterprises, yet their managers are the men most familiar with the world's money markets and their approval, therefore, of any financial undertaking is highly esteemed. ”

“ Folks will get clearer and more concise information when they make financial decisions, instead of having to worry about deceptive fine print. And shareholders and pension holders will have a stronger voice in the boardrooms of companies in which they invest their savings. ”

“ Unless the assets have been applied in this way, the balance sheet gives no assurance to the creditors that funds will be available for the settlement of their claims at maturity. It may be that the reserved profits are being used for further extensions of plant and so will not be easily available at maturity of the obligations. Again they may be invested in increased stocks of current assets and so be readily available. Only an analysis of the balance sheet will show the financial policy that is being pursued. ”

“ Few people have the sense of financial individuality strongly developed. They do not know what it means to be a controller of wealth, to have that which releases the sources of social action—its medium of exchange. They want money, but not for money’s sake. They want it for what it will buy in the way of simple comforts, whereas the financier wants it for what it will control—for what it will represent in the way of dignity, force, power. ”

“ There was nothing financial, still less sordid, in her previsions: she cared about what were considered refinements, and not about the money that was to pay for them. ”

“ The history of the last half-century is accordingly in large measure a history of financial titans, whose methods were not scrutinised with too much care and who were honoured in proportion as they produced the results, irrespective of the means they used. ”

“ The man who possesses the right class of securities should, therefore, take them to the cheapest market, and the owners of the less marketable varieties might remember that from 41⁄2 to 5 per cent. per annum on the overdraft and 1⁄8 per cent. commission on the turn-over are very full rates, which may often be considerably reduced when the customer, whose credit is good, does a large and profitable business. ”

“ They say that the active manager of industry, the business man or entrepreneur, in the first place is always more or less in debt; in the second place, is always buying labor, or materials, or goods, with the intention of selling a product at a later date at an advance in price. He habitually measures his gains in terms of money, and not in terms of the commodities he can buy with the money. In times when prices are falling, he finds it harder to meet his debts, and to dispose of his goods in hand at a money advance over what they cost him. ”

“ Investment bankers, like J. P. Morgan & Co., dealers in bonds, stocks and notes, encroached upon the functions of the three other classes of corporations with which their business brought them into contact. They became the directing power in railroads, public service and industrial companies through which our great business operations are conducted—the makers of bonds and stocks. They became the directing power in the life insurance companies, and other corporate reservoirs of the people’s savings—the buyers of bonds and stocks. ”

“ An investor seeking the advice of a registered investment adviser must, if the legislative purpose is to be served, be permitted to evaluate such overlapping motivations, through appropriate disclosure, in deciding whether an adviser is serving 'two masters' or only one, 'especially * * * if one of the masters happens to be economic self-interest.' United States v. ”

“ Thanks to their numerous agencies, to their attractive conduct of business, with the service of a courteous and attentive staff, they have gradually taught the people new habits in investment and confidence in credit, to such a degree that he who but yesterday hoarded in a stocking prefers to-day, if not to speculate on the Bourse, at least to make deposits in the savings banks. ”

“ But the chief selling agent of the corporation has found it necessary, in order to keep the business going, to incur huge expenses for entertaining his customers, finds it necessary to incur great travelling expenses, to use only the most expensive hotels, and, incidentally, to drink a great deal more than his personal inclinations would call for, in keeping the business for his house. I waive discussion of the extraordinary fees which a trust promotor makes, in effecting a consolidation of big business units,—a process of exchange. ”

“ In neither case can the adviser act intelligently unless he knows what end he is seeking to accomplish.
It is plainly impossible within the limits of a small volume to consider the needs of all classes of investors. ”

“ The study of carefully prepared statements of customers made at frequent intervals reveals to the banker not only the nature of the operations represented by the paper presented for discount, but the trend of the business of his customers and, through them, of the entire country. With such knowledge, he is not only able to protect his institution against improper loans and discounts, but to give valuable advice to his customers, advice which no one else is in a position to give so accurately. ”

“ Other methods fix the amount as so many per cent of gross or net profit, of the bonds outstanding, of total business done, etc. Oftentimes, scientific accuracy, even if desirable, is impossible because of provisions in the trust agreement to the effect that the moneys in the sinking fund are to be used for the purchase of the company’s own bonds at market but providing a maximum price above which none are to be bought. ”

“ The growth and development in fifty years has produced in the United States a banking unit, doing in a conglomerate way what it ought to be doing as a departmental business, with four distinct functions: viz., a commercial business, the manufacturing of credit; a savings bank business, accumulating the savings of the laboring [Pg 239] masses, which is a sacred trust fund that should be placed in high grade investments; a trust company business, executing trusts, and carrying on agencies of every kind ”

“ The funds may be left for accretion in a savings bank; they may be used to purchase high-grade securities; or with them the very bonds which they are to redeem may be bought and canceled immediately, or allowed to run, the interest accretions going into the fund also. Securities for investment may be bought at a premium or a discount. Expenses will be incurred by way of commission or salary for the trustee, expenses of the trust, advertising, brokers’ commission, etc.; and income will be received by the trustee from the securities held and even from the unexpended balance of cash. ”

“ He further requires a good list of securities [126] which can be either converted or pledged with the Bank of England should occasion arise, and such a list will not return him much more than 3 per cent. upon the sum devoted to that purpose. Then he employs a portion of his funds in the short-loan market, so he has only about 60 or 70 per cent. of his deposits to advance in the shape of loans, overdrafts and discounts to customers. In other words, a well-managed bank has to devote a large proportion of its resources to insuring its business. ”