Welcome to the second installment of our New Feature by our own financial guru, Susan Stewart, CEO of Charter Financial Group. Read Susan's impressive bio here. She and her writing partner, Kerry Hannon, have put this series together for us as part of their forthcoming book on investing for women. -Elaine L.

by Susan Stewart

Here's what happened. I practiced law for a couple of years and found it incredibly boring. Interested in financial matters, and attracted to the brokerage industry, I believed naively that a career as a broker would start with training in how to manage stock and bond portfolios.

So in the mid-80s, I joined a major brokerage house. I took a multiple-choice test that, in contrast to the bar exam taken only a few years earlier, was incredibly easy. I couldn't imagine who wouldn't pass. It left me wondering whether it really was any measure of intelligence or competency in managing stock and bond portfolios.

Well it wasn't. It was never designed to test whether one knew how to manage money. Its sole purpose was to confer a license to sell, so I now was licensed to sell securities as a stockbroker. As it turns out, investing well has nothing to do with selling securities. My first clients were family and friends and, needless to say, I didn't do very well by them. It's good I have five siblings. That way, I could burn through a couple of them during my brokerage stint and still have three left as clients today.

It seems everything the firm told me to sell to clients took a nosedive right after my clients followed my advice to buy. The company wasn't concerned with whether or not portfolios grew, anyway.

I will never forget an incident during the market collapse of 1987. Trading systems weren't so good then and we did everything on paper, including entering trade orders. That first day of the crash, you'd submit an order and never hear back whether the trade was filled or not, let alone at what price. Trading into that was like dumping money into a black hole, and I wanted my clients to sit tight until the dust settled.

My manager felt differently. With veins popping out of his neck, he strode over to me and said, "You are in the business of sales, not in the business of managing money. Trade."

And, he was right. My firm trained us exclusively in sales techniques. So much so that the manager encouraged us to place pictures of material things, such as boats and cars, on our office walls, so that we'd keep our eye on the kinds of things we could afford if we excelled at generating commissions. It was clear that Job One was generating commissions and fees.

Meanwhile, we had sharp looking business cards and soulful TV ads portraying ourselves to clients as financial advisers and implying that our training and expertise was in managing money. But, you know what? We weren't advisers, we were salespeople, and salespeople aren't taught how to manage money.

It wasn't until I left the industry and went to work in the trust department of what became one of the largest banks in the nation that I figured out what was missing. It was there I learned a method to manage portfolios. Learning the process behind picking stocks fascinated me, and I came to see that the system itself was a powerful driver of returns.

It forced actions that seemed counterintuitive, like selling stocks that had gone up, for example, and buying more of stocks that had gone down. Those actions increased the likelihood of landing good returns. The most compelling feature of the process was that there was a process. Having one supplanted anxiety-producing, subjective decision-making with sorting and action steps. What woman wouldn't love that?

The trust industry had its own drawbacks though. Yes, a methodology is good, but theirs focused heavily on buying conservative "value" stocks. Those were the big, old blue chips, and the emphasis was always on not taking too much risk.

Now, I'm all for not taking too much risk, but for me that doesn't mean avoiding whole classes of stocks. Headquarters would issue a 100 stock "buy list," and local portfolio managers would pick a smaller subset for each client. The problem is out of 100 stocks, they all fell into the same three stodgy industries; utilities, railroads, and capital goods manufacturers.

Returns were decent, and clients paid management fees, not commissions. That was certainly better than the brokerage experience, but still not good enough in my opinion. I knew I could do better unfettered by the trust department mindset and began to fantasize about breaking away.

So I did in 1996. Today we use the same recipe to pick to individual stocks and bonds for individuals and a few big pension funds such as DaimlerChrysler, City of Seattle, Washington, and the New York City Employees Retirement System. The method has generated market-beating returns for over a decade.

You see, there’s a fundamental difference in the roles of broker and investment adviser; now I manage money, then I sold stuff. And that shapes everything critical to my clients' financial security.

First and foremost, I track my clients' investment returns. Secondly, clients pay a management fee tied to the monthly value of their portfolios. It's in my best interest to see their portfolios grow. I'm not going to hurt them, if it hurts me, too. That means I don't trade merely to trade, nor do I make any trades bigger than they should be.

Clients' investment performance is on both of our radar screens. It's on mine because if they do well, I do well. It's on theirs because I report it to them quarterly. They can judge whether we've done our job with one bite. Besides, how else could we know whether the right ingredients have been used in the right measure?