The 5 Aces of an Investment Advisor

At the DJCO AGM two weeks ago, Peter Kaufman, one of the directors and author of Poor Charlie’s Almanack, had his very interesting comment on the list of qualities an investment advisor should demonstrate. He calls them the five “Aces” to find in a money manager. I’m posting it because I will find very important.

Here’s Kaufman’s list verbatim:

  1. Total integrity 
  2. Actual deep, deep fluency in whatever you say you are going to do on behalf of the client
  3. A fee structure that’s actually fair in both directions
  4. An uncrowded investment space
  5. A long runway (meaning that the manager is reasonably young in age)

Kaufman also added:

“I further add that if you ever find a money manager who possesses all five of these characteristics, there are two things you should do. One, you should put money with them immediately. And number two, put as much money as you are allowed to put [with them],”

This is how it all came up:

“I came up with this list in giving reference to a very exceptional money manager,” Kaufman explained. “And I not only wanted to give what I thought was a correct reference, I wanted the person I was giving the reference to in turn be able to relate this to the real shot caller so that a compelling narrative would be transferred from me directly to the ultimate shot caller. So, I came up with what I call the five aces, five aces being the highest-hand of cards in a game of wildcard poker.”

The list is not only useful for evaluating where to allocate money, but it’s a great list for money managers to use as part of their own aspiration.

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