So… I’m laughing here… reading a short article from a tax attorney friend. He always picks the most interesting material to make his points to financial professionals. I’m adding a bit of a twist to share with you today; sometimes it’s good to be reminded of things……………
There’s so much news coming out of Washington these days that it really is hard to keep up. (Some people suggest there’s literally too much to keep up with, and you shouldn’t even try. I think there’s real wisdom there.)
One little nugget that came out a couple of days ago caught my eye, however. The government of Qatar, seeking to rebrand its image in the midst of a feud with its Persian Gulf neighbors, has hired former U.S. Attorney General Michael Mukasey to represent its interests here in the United States – at a bargain rate of $1,600 per hour!
Now, charging nearly $27 per minute may sound like a real coup for Mukasey. And it probably is, if you don’t mind clients paying really close attention to your timesheets. (I’m not ordinarily a detail guy, but if my lawyer was billing me that much, I’d want to make sure I wasn’t paying for him to wander off to the kitchen to grab a Diet Coke!)
But in the end, $1600 is still just an hourly rate. It doesn’t bear much relationship, if any, to the actual value Mukasey is delivering to the Kingdom. And it certainly doesn’t encourage him to hustle to the finish line to accomplish whatever it is they hired him to accomplish!
Years ago, I read a great history of a very different attorney. Investigative Reporter Gus Russo’sSupermob traces the history of the Chicago “Outfit” through the career of Sidney Korshak. Korshak started out as an associate of Al Capone’s lawyer, but wound up overseeing the mob’s interests in Los Angeles and Las Vegas from a Renoir-filled Regency-style manor on Chalon Road, just a few doors down from the Bel-Air Country Club.
It’s an absolutely fascinating story, well worth reading for any fan of mob history. If you want a shorter version, check out Nick Tosches’ classicVanity Fair piece, The Man Who Kept the Secrets. Here’s how Tosches describes Korshak:
“In the land of dreams, Sidney Korshak was a shadow among shadows, a wisp of smoke curling around the brighter lights. What the Eisners, Ovitzes, and Geffens are to all that glitters now, Sidney Korshak was to all that was dark. His legend beguiled the legendary. His was the hidden mystery at the heart of the furnace of illusion and desire. To some, he was evil incarnate; to others, he was the nicest guy in the world.”
It won’t surprise you to learn that Korshak didn’t really “practice law” in the way most of us think of attorneys working. He was a “fixer,” like George Clooney’s Michael Clayton, “a janitor,” a bag man hired to cast a thin veneer of respectability over the dirty money behind the mob’s glamorous western real estate, casino, and movie studio interests. And he would never have dreamed of charging an hourly rate – even one as high as $1600.
Korshak didn’t need to keep timesheets, you see. His client – a manager at the Desert Inn, perhaps – would phone in a panic because the food and beverage workers’ union was about to call a strike. Korshak would ask the client for a flat $50,000. Then he would pick up the phone, call the union boss, and make him an offer he somehow never refused. Problem solved.
Back in the 1950s, 60s, and 70s, when Korshak was at his zenith, they wouldn’t have called this “value pricing.” (“Shakedown” was probably closer to the truth.) But Korshak understood that clients were hiring him to solve a problem. (That’s what fixers do – they fix things.) With that understanding in mind, he would propose fees that reflected the value the client placed on solving those problems, which he knew bore no relation to the amount oftime he spent solving them.
Some of you may be offended, or think that this is a poor example of value pricing. I’m not saying Sidney Korshak is a role model. I’m not saying you should admire him, or who he did business with, or even how he did business. (Nobody said you should admire Tony Soprano, either, but lots of you waited eagerly on Sunday nights for the next episode of The Sopranos.) But I will say his way of pricing his services was better for his clients than Michael Mukasey’s absurd $1,600 per hour.
Somehow… I personally would rather pay Mukasey than get involved with the mob, if you know what I mean. I’d rather not be included in a trail of bodies one way or the other. Unfortunately, for many people, working with brokers in the financial industry may feel like working with the mob. From the ‘big dog’ wirehouses, to banks, to individual brokers or agents, working around a lot of money can change people and not always for the better. So what is the value of a good, holistic, fiduciary advisor? Vanguard has given a percentage answer: an added 3% in real return on portfolios. The real answer involves a much longer explanation. The shorter answer is: a good advisor really is a ‘fixer’ of ‘money problems’, or rather, a solutions provider. We stay attuned to the various rules changes, financial best practices, market research and the changing market environment. We listen, we research, we discuss, we objectively co-create solutions and we keep you sane when the market is not. Providing the missing ‘peace’ to your financial puzzle is the real value. And that pays long term dividends. We won’t need Tony.