Archive for May, 2010

Top Ten Things Advisors Should Be Doing NOW!

Tuesday, May 25th, 2010

OK – so the market is back down, the news from abroad is depressing, and it’s getting harder and harder to feel optimistic (despite the arrival of summer). So, what should you do? Here are some ideas to help you survive the day(s):

10 – Call your clients – now is the time to be proactive; if clients have to call you on days like we’ve had, you’re putting yourself way behind the eight ball;

9 – Exude confidence with your clients – clients are paying you to keep them calm during turbulent times – they are not paying you to commiserate with them;

8 – Have some value-added information to share with your clients – whether internal reports or forecasts, or external, show clients that you are taking the time to keep on top of things and that you do have a viewpoint;

7 – Call your clients – oh, did I already say that? Well – that’s because it’s the most important thing that you can do right now;

6 – Continue to execute your overall growth strategy – while it’s hard to think about the future during difficult market times, especially when you are seeing both you and your clients accounts drop in value, now is not the time to change course;

5 – Spend money to make money – your need to continue to invest in your business and not put off expenditures until things get better – you know that things will get better eventually – they always do;

4 – Rev up your marketing activities – winners and losers always emerge from market turmoil – the clients of all of those advisors who are not calling, and are hiding under the table , will be looking for new advisors at some point;

3 – Take the time to ensure that your value proposition and mission statement are strong and truly reflect why you are better than the competition;

2 – Make sure that your communications prominently display your value proposition and mission statement so that clients and prospects never forget why you are the best; and

1 – Take a deep breath – this too shall pass.

It’s Beginning to Feel a Lot Like …. (October 2008)

Thursday, May 20th, 2010

I almost entitled this – What Goes Up Must Come Down – in the sense that most market experts have been expecting a correction (as part of a normal bull market). But this doesn’t feel like a correction – this feels like those days back in the Fall of 2008 and the beginning of 2009 when your stomach dropped on a daily basis and +300 point up or down days were not uncommon.

It started this time with Greece …. and the other PIIGS (Portugal, Ireland and Italy) and their debt problems … then add on Goldman Sachs, European indecision on how to handle the debt problems, a falling Euro and the impending passage of the most comprehensive financial reform bill in decades. Oh, sorry – I forgot to mention weaker than expected economic numbers over the past week and that 1000 drop in the dow that still can’t be explained.

Is it any wonder that market participants are nervous? Trust me – talk of a double dip recession is going to come storming back.

I don’t know if in a month from now things will be better or worse – I wish I did. I am not a market forecaster and I gave up my economic research duties a long time ago.

But what I do know is that clients are nervous – and rightfully so. 2009 was a year of recovery in the markets, but even so many investors are not back to where they were pre-Lehman. Very few can be comfortable now thinking that the roller coaster may have started on a large down hill run again. And it won’t be long before the questions about the validity of asset allocation are raised again.

Now is the time for over-communication. Hopefully, those of you that are client-facing have already been proactively calling your clients and keeping them calm. Use whatever information you can from the information that you read to keep them focused on their long-term goals. Make sure that their risk tolerance profiles are up to date. I don’t think you can over-communicate!

This to shall pass. The question is whether it will happen soon, with less pain, or longer-term with more pain. Don’t let that issue get in the way of helping your clients now. They will appreciate it and you regardless of which scenario plays out.

Poll: Alt Mutual Funds to Face More Scrutiny

Thursday, May 20th, 2010

Published on May 19, 2010 – Ignites – An Information Service of Money-Media, a Financial Times Company
By Gregory Shulas

Mutual funds that embrace alternative investment strategies will face tougher scrutiny in the wake of the May 6 “flash crash.” That’s according to a vast majority of Ignites poll respondents.

Roughly 74%, or 124 voters, said mutual funds that use derivatives will face tougher reviews in the months ahead from regulators and investors. That made it the most popular option selected in an Ignites survey that asked whether the mysterious market gyration will result in more scrutiny of alt-style mutual funds.

Of the majority vote, 43%, or 72 voters, expect a moderate increase in scrutiny, while 31%, or 52 voters, said a significant increase in oversight awaits such funds.

In contrast, 26%, or 44 voters, said it will be business as usual for mutual funds that use alternative strategies, such as futures contracts, swaps or commodities. That made that option the survey’s least popular choice.

Waddell & Reed’s Ivy Asset Strategy fund came under a microscope after Reuters reported that it was responsible for an unusually large wave of futures selling that allegedly contributed to the “flash crash.”

The Kansas City area-based firm unloaded 75,000 e-mini contracts, or S&P 500 derivatives, during the 20-minute equities plunge, according to a Chicago Mercantile Exchange document that Reuters obtained. The document apparently identified Waddell as the unnamed trader that Commodities Futures Trading Commission chairman Gary Gensler mentioned in congressional testimony this month.

Waddell & Reed has refuted claims that it was responsible for the disruption. The company has cited an analysis showing how its trading accounted for 1% of the volume traded in the S&P 500 on May 6. The gyration at one point caused the Dow Jones Industrial Average to fall by nearly 1,000 points while temporarily pushing well-established companies into penny stocks.

Regardless of what investigators ultimately find, the incident is spurring questions about the effect alt-oriented funds can have on the market, acknowledges Andy Klausner, principal of AK Advisory Partners, a Boston-based consulting firm.

Until the pending financial reform bill is finalized, it’s hard to know where regulators will stand on retail funds that emphasize derivatives, Klausner says. A legitimate concern for the industry is whether Congress and other government agencies will rush to judgment and impose unnecessary restrictions on alt-oriented products, he says.

“I think there is still so much uncertainty with what happened on May 6,” Klausner says. “Let’s hope regulators don’t react too quickly to what happened. We… need to determine what exactly happened first.”

Alternative-oriented mutual funds have grown in popularity as financial advisors have sought exposure to asset classes that have low correlations with traditional equity strategies. By accessing alternatives in a mutual fund structure, investors receive lower fees and more transparency than they would in a hedge fund, industry experts argue. Further, alt-style mutual funds are free of the hedge fund gates that lock up clients’ assets until performance recovers.

Nearly 170 readers participated in the survey as of 3 p.m. Tuesday. The survey is an unscientific sampling of Ignites subscribers, who include money managers, service providers and financial advisors. Participants were self-selected and voted only once.

AK Affiliate – Zenith Creative Group – Announces Exciting New Alliance

Tuesday, May 18th, 2010


MarketCounsel Clients to Receive Special Offers on Zenith’s Design and Branding Solutions

ENGLEWOOD, N.J. – May 17, 2010 –MarketCounsel, a leading provider of comprehensive business and regulatory consulting services to independent registered investment advisers, today announced an alliance with Zenith Creative Group, a full service marketing agency that specializes in helping entrepreneurial financial services professionals promote their businesses.

MarketCounsel clients will receive a special discount on all Zenith services. In addition, Zenith has developed customized packages exclusively for MarketCounsel clients to help with branding strategy, corporate identity, marketing collateral, copywriting, website development and search engine marketing.

“For some time, we have identified a great need for a marketing and design firm specializing in the investment advisor niche; Zenith Creative Group has filled that gap.  Through this alliance MarketCounsel continues to address the needs of investment advisors in managing their growth as businesses,” said Brian Hamburger, Managing Director at MarketCounsel.

“In today’s competitive marketplace, financial services professionals need to clearly distinguish themselves. With this alliance, MarketCounsel’s advisor clients can choose from the full spectrum of Zenith’s online and traditional services to create distinct brand images and marketing collateral,” said Andy Klausner, Founder and Principal of Zenith. “We are very excited to begin this mutually rewarding partnership.”

“We are very pleased to form this alliance with Zenith Creative Group. Their strategy team understands the unique needs of financial services professionals, while their distinguished creative team brings tremendous experience to this market.  Together, they complement our mission of serving as a full resource for investment advisors seeking custom solutions in growing their businesses,” said Marc Cohen, Executive Vice President for MarketCounsel.

Through their Trusted Partner Program, MarketCounsel maintains relationships with a network of leading service providers to offer its members with unparalleled service and value.  The companies agree to promote one another’s interests, provide exclusive special access to products and services to one another’s clients, and to coordinate the delivery of such products and services through unique platform integration.

 For more information or to speak with MarketCounsel, please contact Carol Graumann at (973) 732-3521 or  You can also visit

About Market Counsel

MarketCounsel is the leading business and regulatory compliance consulting firm to the country’s preeminent entrepreneurial investment advisors. Its comprehensive service offering delivers sound, yet business-savvy, regulatory compliance solutions. The firm pairs an impressive roster of compliance professionals with state-of-the-art technology to meet, anticipate,and exceed the exacting needs of its clients. From the start-up of an investment advisor through its RIA Incubator program to the outsourced compliance department capabilities of the RIA Institute, MarketCounsel’s service platform consistently delivers on the promise of trusted counsel within the wrapper of extraordinary service.

About Zenith Creative Group

Zenith Creative Group offers a complete spectrum of online and traditional marketing solutions to help financial services professionals distinguish their businesses. Zenith helps create their ideal business – one which reflects their personality, clearly articulates their value-added, impresses with its professionalism and helps them reach their goals.

Top Ten Thoughts of a Washington Veteran

Friday, May 14th, 2010

The keynote speaker at the Fi360 conference last week was Paul O’Neill – former CEO of Alcoa and Treasury Secretary under George W. Bush. His reputation is for being honest and straightforward – and he still is. Most refreshing was his willingness to admit that he has made mistakes and to give opinions even when they are unpopular – no wonder why he didn’t make it as a politician! Here are some very interesting things that he said:

10) The government is as guilty as anyone in showing a lack of fiduciary responsibility. He noted that in this meeting of almost 400 people focused on fiduciary responsibility, not one was from the government.

9) There should be a Chapter 11 mechanism for nations – especially those that do not live within their means (this was in a general comment about the events in Greece).

8) The real number for unfunded government liabilities is somewhere in the neighborhood of $63 trillion. If private sector managers ran their companies like the government runs its finances, they would probably be in jail.

7) The problem with the current 15,000 page proposed financial reform bill is that it is 14,998 pages too long.

6) Another problem with this bill is that people will still be allowed to purchase homes with as little as 5% down; the original proposal has this number at 2.5%.

5) While it is popular to say that the only way to deal with budget deficits is to either raise taxes or cut entitlements, this masks that real problems demand real solutions but are too hard politically. Examples include problems with our education system (see below).

4) 30% of ten-year olds in the US can’t read. How can this country remain great when 10% of its future workforce is ill-equipped?

4) Social Security is the greatest Ponzi Scheme in history – bigger than Madoff.

3) The recent health care reform failed to address quality and cost issues.

2) The US tax code costs $400 billion a year to administer and still under-collects taxes by 15%.

1) Politicians should educate not pander.

Finally, when referring to being fired by President Bush, he said that he is living proof that the true will set you free!

Brokerage Duo Forms $1.3B Indie Advisory Firm

Thursday, May 13th, 2010

Published on May 13, 2010 – FUNDfire – An Information Service of Money-Media, a Financial Times Company
By Tom Stabile 

Two formerCredit Suisse advisors who left the brokerage with nearly all of their $1.2 billion in client assets have formed an independent shop in Baltimore. Harbor Investment Advisorynow has $1.3 billion in assets just a few months after launching, and is aiming to hire advisors – especially wirehouse veterans – to join the founders, Robert Black III and Stephen Kelly.

Efforts to recruit wirehouse advisors could be buoyed by Harbor’s dual-registered model, which has a unique element: the partners not only filed as a registered investment advisor with the Securities and Exchange Commission but also built their own broker-dealer arm under Financial Industry Regulatory Authorityrules. Becoming a FINRA member is a somewhat cumbersome step for new independent advisor firms, and therefore uncommon, but it resembles the mix of fee-based and transaction-based services the advisors offered beforehand, says Betsy Brennen, who is the firm’s third partner and serves as its COO and chief compliance officer

“We didn’t want to disrupt the relationships we had with customers who have been working with us for 25 years,” she adds. The firm, which has 10 employees, serves high-net-worth clients, foundations and endowments.

Harbor opened its doors on Feb. 1, a few weeks after Black and Kelly left Credit Suisse, though Brennen already had been on board helping to set up the firm. All three had worked together at Alex Brown & Sons in the late 1990s, and remained when Bankers Trust bought it in 1997 and later when Deutsche Bank bought the whole organization in 1999. Black and Kelly left a few years later, at separate times, for Donaldson, Lufkin & Jenrette Securities, which Credit Suisse later bought.

“The vast majority of our clients migrated from Credit Suisse to Harbor, and that’s a reflection of the longstanding relationships Rob and Steve have with their clients,” Brennen says.

Harbor’s website states that the partners value the advantage of “having the focus and professionalism to deliver superior service” over being part of a large organization, and touts how it can “concentrate our efforts to provide a sophisticated suite of products and resources.”

Brennen says Harbor’s investment approach spans across options such as separately managed accounts, hedge funds, private equity, mutual funds, exchange-traded funds, and individual equity and fixed income securities. The firm custodies with BNY Mellon’s Pershing unit, and connects to a few of its managers through Pershing’s managed accounts platforms, but it does most resemble the set-up that Harbor’s clients previously had with the team. “It’s a bigger undertaking both financially and operationally,” she adds.

The partners assessed various other options, including joining existing platforms, before choosing to build the broker-dealer unit to handle transactional business from scratch. “This certainly wasn’t the least expensive option, primarily because of the net capital required [by regulators] and the capital outlay to build the infrastructure,” Brennen says. “Many advisors look into it and decide not to go forward with this approach. That’s why you see growth in the market of firms that cater to independent advisors with platforms and services. We simply wanted to be as independent as possible, and in this structure, we are beholden to no one.”

Among the added responsibilities of starting up and running a broker-dealer are extensive reporting, interview and filing requirements through FINRA, as well as the designation of partners for specific oversight functions and ongoing compliance duties. For instance, FINRA member firms have to designate specific principals or others responsible for compliance, financial affairs and operations. Harbor has outsourced some of its functions initially, but intends to fill all posts with internal resources as it fills out staffing, Brennen says.

Setting up a separate broker-dealer is a rare step for a new independent advisor firm, says Andrew Klausner, principal of AK Advisory Partners, a Boston-based consulting firm. It’s far more common for such firms to affiliate with another independent brokerage, he says.

Klausner says the move could make sense if the team plans to trade extensively or if the transactional side of the practice is a significant profit center. “But it’s a lot of work, a lot of expense,” he adds. “You don’t just do this as an accommodation for clients.”

He adds that there are some institutions that now are specifically seeking advisors that are separate from a broker-dealer arm, to ensure an “arm’s length” separation between advice and trading functions. But he says advisors in most brokerage formats will use external trading platforms when they need such access.

The F Word Rocks

Monday, May 10th, 2010

No – it’s not the word you’re thinking. The F word referred to here is Fiduciary. I was just at a conference sponsored by Fi360, an organization which provides fiduciary education and practice management training to the financial services industry (

This is a phrase that I heard – it is actually being promoted by The Committee for the Fiduciary Standard. You can gather from it that both organizations support the fiduciary standard for all industry participants (the current debate revolves around the broker/dealer world, where advisors are not held to this standard, and the RIA world where advisors are held to this standard).

Simply put, in the broker/dealer world (e.g., wirehouses), advisors are held to a suitability standard – know your client – is a given recommendation suitable for the client? The standard in the RIA world is higher – these advisors are held to a fiduciary standard – essentially, what would an expert in this area do in this situation?

It is unclear whether regulatory reform will mandate the fiduciary standard for all, but at this point it seems unlikely. Both sides have powerful lobbies and this issue is sure to rage on.

Interestingly, there were many wirehouse advisors at this conference and there are many that are members of Fi360 and have earned their AIF (Accredited Investment Fiduciary) designation. As this debate continues, I still believe that the key for any client is not where their advisor resides (wirehouse v. RIA), but rather what he/she has done to educate him/herself and what they do in their practice to help add value to their clients.

I have said it before and I will say it again – hiring an RIA who is held to the fiduciary standard does not guarantee the client that they will be satisfied any more than hiring a wirehouse advisor will assure dissatisfaction.

Until our regulatory agencies prove better at enforcement, the individual client is best served by doing extensive due diligence on their advisor or on advisor candidates regardless of which standard they are held to.

The Truth About Fees

Tuesday, May 4th, 2010

One of the most confusing things for many investors is understanding the fees that they are being charged on their investments. Especially when comparing various investment options, it is important that investors feel comfortable that they able to make an “apples” to “apples” comparison.

We have just written a new White Paper entitled The Truth About Fees  to help educate investors on fees in three of today’s common fee arrangements – commission accounts, working with a “fee-only” advisor or planner and “wrap-fee” accounts. We hope that you find this paper useful; feel free to pass it along to anyone else whom you feel would benefit from it.