#investoradvocacysolutions

[investoradvocate-blog]

Corruption, embezzlement, fraud, these are all characteristics which exist everywhere. It is regrettably the way human nature functions, whether we like it or not. What successful economies do is keep it to a minimum. No one has ever eliminated any of that stuff.

Alan Greenspan

[investoradvocate-blog]

Remember Circuit City? Bear Stearns? Lehman Brothers? Sports Authority? Once, all were billion-dollar companies - then gone in a moment. The fatal problem might be fraud or corruption, but more often, it's simply that management didn't see 'over the other side of the hill.

Steve Bannon

[investoradvocate-blog]

A New Beginning

I started my career some 40 years ago with Merrill Lynch. Really, it was Merrill Lynch, Pierce, Fenner & Smith, but that doesn’t really matter.  What does matter is, that back then, it was simple.  Everything was simple. The way we transacted our business. The way we reported it.  What we bought, and what we sold. There were 1400 mutual funds. Not companies... there were about 1400 different funds.  The total net assets of funds invested in mutual funds was approximately 46 billion, and about 6% of US Households held mutual funds in their portfolios.  Today, mutual funds comprise of 18.75 TRILLION dollars with over 50% of US Households being invested in mutual funds. It isn’t just mutual funds that have changed dramatically since I started in the industry, The DJIA  (Dow Jones Industrial Average) closed on 12/31/1979 at 838.74, today the DJIA closed at 25,583.75!! In 2008, just 11 years ago, people thought that our economy would never recover after one of the worst economic debacles in history.  The DJIA closed on 12/31/08 at 8776.39. I have been through 3 MAJOR market corrections, although most people, and the media thought the world was ending at the time, I knew it wasn’t. To take it further.. companies like Apple,and  Microsoft weren’t even trading publicly. Shoot.. I didn’t even understand what a computer was back then.  

With the changes that have taken place, there have been some really good changes, and some really bad changes.  Good?  Our technology improved vastly. We have the ability to track what is really happening in a clients account. We have a vast amount of more research available, and we have knowledge of the past 40 years.  Bad? Our investments have become so complicated that most average investors don’t really know what they are investing in, and why. The array of investments from a Unit Investment Trust, a Variable Annuity, a Fixed Annuity, a Market Linked CD, a reverse convertible (no longer offered.. but that will be explained in a later blog..trust me), and that is just the beginning.  From Real Estate Investment Trusts, to Corporate Bond Funds, ETF’s, to managed products the list goes on. 

As an investor, do you know what these things are? Most don’t.  Most just put their trust in a person to allocate their life savings into something because they told them so.  Or better yet, to try and do it themselves, because they think they are smarter and know more than a professional. Can you see how this can go sideways really quick? When I left the industry three years ago, I left with my head shaking.  My position with a very large bank was as a regional compliance manager.  I reviewed the trades my advisors placed, and more importantly, I spoke with my advisors clients on a daily basis.  We talked about a multitude of things, but primarily their investment portfolio and how they felt they were being managed by their advisor.  I always felt like I was in a dichotomy in my job.  I was working for the firm, protecting the firm, protecting the advisors, and lastly, protecting the clients. I stepped in when something was egregious, but it was typically always a client complaint.  There were many times when the firm was pushing a new product in which the firm received a larger percentage of the fees that were paid because they were proprietary products ( a product which the firm developed and marketed themselves).  I would tell my supervisor that there was an uptick in the advisors allocation in a particular product, and the response was always positive in the form of, good job, he/she sold more, he/she on their way to making their goals, their in for a record breaking commission month.  Rather than, let’s take a look at the clients who he/she has sold this product to, does it make sense for their portfolio, risk tolerance, investment objective? In  my observation, because the client base knew less and less about the products which they were now investing in, it was easier for the advisor to sway them in a direction that might not have been their original intention.

So the question is... are we better of worse off than we were when times were much simpler? 

I decided to start this blog as a way to bring attention to some of the things that I don’t believe are being focused on today. Do you know how you are currently invested?  Do you  know what your investment strategy is? Do you know how your advisor is being paid, and how much you have paid him/her in the last 6 months, year, 5 years? Do you know your advisor’s history. Do they have any regulatory disclosures, client complaints that may have caused them or their firm to pay a client a significant amount of money?

 I hope that I can bring some of my background and the ability to communicate to you in a way you can understand, and hopefully raise awareness.