By in Investing, Personal Finance Luminaries, Wealth

Interview with Daniel C. Goldie, CFA, CFP

Do you want to know the answer to successful investing? Read The Investment Answer and the following interview with the accomplished author.

Dan Goldie and Gordon Murray wrote a brief, yet comprehensive guide to investing which covers all the major investing decisions in only 66 pages. After being asked to review the book, I became interested in the background of the authors, both accomplished in their respective investing fields. Furthermore, Goldie, a retired professional tennis player, engaged in a sport that was close to my heart. Additionally, the reviews on the back cover of the book span a who’s who of modern finance including notables Eugene Fama, Harry Markowitz (Nobel Laureate), and others. I needed to know more of the back story to The Investment Answer, so here is an interview with Daniel C. Goldie, CFA, CFP. Enjoy.

1. Coming from a background of professional tennis, how did you transition to investment advising?

I studied economics and finance as an undergraduate at Stanford University, and had an internship during the latter part of my senior year with a local financial planning firm. I really enjoyed that work and decided that I would do something in financial services when my tennis career was over. I continued to study financial planning while on the tennis tour, and I was able to make some good connections in the industry largely because I was a pro athlete. When the time came to make my transition, I was fortunate to find a firm that was able to help me market my services and find clients, which is perhaps the most challenging part of being a new advisor.

 2. What informed your decision to avoid the popular “stock picking” methods and selling of proprietary products in favor of an indexing/asset allocation model?

One of the investment firms I met with during my transition from tennis was Dimensional Fund Advisors, an institutional money management firm in Santa Monica, California. This was in 1991, when the firm was just starting to make their passively managed mutual funds available to independent financial advisors. Most influential to me was Dimensional’s co-founder, Rex Sinquefield, who had previously started the world’s first S&P 500 index fund at the American National Bank in Chicago in the early 1970s.

As I was introduced to Dimensional’s data and the many academic and professional studies that showed the failure of active managers to beat markets, it was like a light bulb turned on (this is why there is a light bulb on the cover of the book), and I thought to myself: this has to be the way the world works. The evidence was overwhelmingly convincing, and consistent with what I had learned at Stanford many years earlier.

3. Being a fee only investment advisor is difficult initially; developing clients, marketing your services etc. How long did it take before you made a reasonable living?

It took me about three years to build an initial base of clients and to start earning a reasonable income. This is the most difficult time for most advisors and why most fail. It took a lot of persistence.

 4. What were the most important activities you engaged in to build your business?

The same things I continue to do today: respond to clients promptly, follow a disciplined investment approach, communicate with clients clearly and frequently, focus on educating clients, and act as a fiduciary who puts client interests first.

 5. In your book you mentioned that one of the advantages of using a financial advisor is their “access to superior resources.” What type of resources are you referring to?

For example, there are a number of investment products, such as institutional mutual funds or separately managed accounts, which are only accessible by professional advisors. In my case, I use Dimensional mutual funds as the investment vehicles to implement my clients’ investment plans. These funds are not available to individual investors. In addition, some advisors have access to investment research and special software that is not available to individuals.

6. What are your 3-4 best Success Tips for wealth?

 Accept Market Efficiency – it is difficult to beat markets through active management. Instead, build a portfolio that is widely diversified and designed to capture market returns;

Ignore Your Emotions– our own natural instincts can be our worst enemy when it comes to investing. Resist the urge to follow trends, chase “hot” stocks or mutual funds, or pick managers or mutual funds based on past performance;

Risk Determines Expected Return – the most important investment decision you make is how you allocate your assets across different asset classes, such as stocks, bonds, and cash. Over the long-term, risk is the primary driver of returns.

Diversification is Your Friend – diversify away non-market risk such as holding individual securities. Diversification reduces risk without reducing expected return. It may be the only free lunch in finance.

 7. Getting to the quarterfinals of Wimbledon as well as building a successful business are outstanding accomplishments. What are a few of your Success Tips for life?

I think all successful people have a passion for what they do. It’s important to do something that you love – success comes naturally after that. Also, there is no substitute for hard work. In any profession or pursuit, your results will be directly proportionate to the amount of effort you put in. The top people in sports, business, or anything else are made, not born.

8. Is there anything else you would like your readers to know about you and your co-author, Gordon Murray?

I first met Gordon in 2002, shortly after he had retired from a 25-year Wall Street career where he worked with some of the largest institutional investors in the world. We immediately became good friends, and Gordon became enthralled by the investment strategy I was following, which was very different from the ways of investing he had learned on Wall Street.

Gordon was tragically diagnosed with terminal cancer 21 months ago, and since that time, he unselfishly devoted himself to giving back. Among other things, he spoke to Congress about financial reform, wrote an inspirational piece about managing people that is widely used today, and teamed up with me to write our book, which will be his last project. Knowing the urgency of his situation, we finished the book in record time. The writing process was very special for both of us. We worked together beautifully, as if it were meant to happen. We inspired each other and drew meaning from what we were trying to do: create something that would be part of Gordon’s legacy, teach people about a different way to invest, and maybe make the world a better place.

Gordon has been a tremendous teacher, mentor, friend, and colleague to me and many others. He will be dearly missed when he is gone.

The Investment Answer is a unique look at investing from two important fiance professionals.

How did this interview inspire you? What did you learn from Goldie that you can use in your own life?