The EL CAP View

Having a realistic financial plan in place is very important when preparing for major life events like buying a home, sending children off to college, or funding retirement.  But when your financial plan comes with a financial planner or an investment advisor, you actually handicap your chances of achieving your goals.  Investors seeking help putting together a financial plan very often end up becoming a part of the financial planner’s financial plan. Continue reading →

We caught a CNBC segment yesterday that featured Steve Rattner, the former “Car Czar” and Business Insider Editor and CEO, Henry Blodget.  Their discussion revolved around the upcoming Facebook IPO, but it was their general comments about individual investors that really caught our attention.  The two were in agreement that individuals should never buy stocks.  We couldn’t disagree more.

In the segment, Mr. Rattner stated that, “individual investors shouldn’t be playing the stock market any more than you should take out your own appendix.”  He went on to add that individuals couldn’t possibly have sensible opinions with respect to overall stock valuations. Continue reading →

We recently ran a commentary, “Will the Real Butchers Please Stand Up?”  Our commentary was in response to the viral whiteboard video, “Brokers vs. Fiduciaries” that was produced by Chicago-based HighTower Advisors. The video, which was narrated by HighTower’s CEO Elliot Weissbluth, poked fun at brokers, portraying them as careless butchers, and contrasted them to registered investment advisors (RIAs), highlighting the delicate fiduciary duty that advisors owe investors. Continue reading →

Back when I worked in institutional equity sales at Merrill Lynch, we charged our accounts commissions to execute their trades.  Bundled into the commissions paid was access to our firm’s research and research was only offered to customers who had a trading relationship with us.  By bundling trade execution together with research, firms like Merrill were able to somewhat hold the line on declining commission rates. Continue reading →

The SEC appears to be on the verge of adopting a universal fiduciary standard for all financial professionals.  On the surface, this appears to be a big leap forward for investor protection and it’s being hailed by many as a foolproof way to align the interests of investors with those of the industry.  But don’t be fooled by this regulatory Trojan horse – like most major regulatory initiatives, this will benefit the investment industry at the expense of investors. Continue reading →

HighTower Advisors, a Chicago based registered investment advisor, recently published a very clever whiteboard animation titled “Brokers vs. Fiduciaries.”  In the video, HighTower CEO Elliot Weissbluth describes brokers as cleaver wielding butchers.  The video implies that the butchers would be content if you eat nothing but red meat until you keel over with clogged arteries, comparing them to brokers.  On the other hand, the video portrays fiduciaries (presumably referring to registered investment advisors (RIAs)) as dietitians who thoughtfully prescribe a balanced diet and want to see you live forever. Continue reading →

Stockbrokers are going extinct.  Wall Street hasn’t trained a real stockbroker in nearly twenty years. Today, stockbrokers have been replaced with “financial consultants” (or whatever they choose to call themselves) who do nothing more than gather clients’ assets, outsource the actual investment management to third parties, and collect fees.

Is the demise of the stockbroker a good thing for investors? We say no, it’s very bad. Continue reading →

Hats off to Greg Smith, the Goldman Sachs executive who published his resignation from the firm in a New York Times Op-Ed this week.  In his piece, Mr. Smith highlighted a decline in Goldman’s culture, describing a firm that has a contemptuous attitude toward its own clients.  Not surprisingly, Goldman didn’t waste any time spinning Mr. Smith as a disgruntled employee who should have aired his grievances to the HR department (that would have gone over well).  Many in the media have dismissed Mr. Smith’s concerns, pointing to the fact that Goldman has been profiting from trading with its clients for nearly 150-years. Continue reading →

The benefits of a well diversified investment portfolio can’t be overstated.  When properly executed, diversification becomes the shock absorber of a portfolio, greatly reducing the risk of investment losses.  But what many investors fail to recognize is that there is a point at which the benefits of diversification stop reducing risk and instead start eating away at investment returns. Continue reading →

It’s universally accepted that lower investment management fees help lead to better long-term investment returns.  Despite this fact, most investors don’t have a clear understanding of the true cost of investment management services or what they are actually paying for.   Investors pay billions of dollars a year in fees in a system that is deliberately designed to deceive investors.  And asset-based pricing is at the root of the problem. Continue reading →