Victory Investment

Archive for December, 2010

Whether you are strategic planning to start your own business, looking forward to some profitable work from home opportunities or searching for a suitable business partner, preparing the perfect setup for a business is one of the first and most important steps that you need to take. From having the right financial capital, good networks and right kind of entrepreneurship to strategic planning and careful decision-making, establishing a business in today’s ever-growing corporate market takes a lot of careful strategic planning and intelligent investment. Once you get the precise guidance for making your business enterprise find the right place in today’s corporate world, making your enterprise proceed smoothly and gaining a cutting edge over your competitors become much easier jobs.

There are several websites that offer valuable guidance and suggestion to help commercial investors, entrepreneurs, business experts, financiers, developers and those planning to start their own personal business enterprise from home in establishing successful and profitable business. People from a variety of fields find these websites very helpful for providing investment guidance and motivation. Whether you are a veteran businessman or a new entrant in the domain of global commerce, investment guidance websites operating twenty-four hour a day and for seven days a week will provide you the right guidance to meet your specific business requirements.

Starting a new business involves investment in a number of ways. One of the first and foremost decisions you have to make is what type of business you want to run, the products you want to deal with and the specific business goals you have in mind regarding the same. Next comes arranging the capital that you can invest and the strategic planning according to which you want to proceed in your commercial venture so that you get to reap the maximum amount of profit in the minimum amount of time. While for businessmen conducting their commercial enterprises for long time periods, points such as these come naturally, for entrepreneurs in their respective commercial fields, proper guidance in the respective commercial fields play a major role in giving their business venture the correct start. From starting a business and finding the right investor to selecting a venture capital and finding the right business partner, investment guidance websites guide you in almost every aspect of your commercial enterprise.

One of the primary factors for a successful business is finding the right exposure for your products and services. In order to gain the best perspective of where exactly your business stands in the current commercial market, you must have clear knowledge about the prevailing market scenario. You can gain an edge over your competitors dealing with the same line of products and/or services by properly understanding the market demands at a particular point of time and what your rivals are offering. Investment guidance websites provide you with a look into making the best business investments so that your commercial venture is able to capture the market (of the relevant product) in minimum amount of time with maximum revenue generated in your favor.

No matter whether you are a veteran in the commercial arena or a newcomer, some fundamental features of marketing remains the same for all types of businesses. Investment guidance websites provide you the right direction and insight regarding the same so that you get a clear picture of the current market scenario and thereby, able to strategically plan your commercial venture. Finding the right franchise is a major step towards establishing marketing channels for a business. An investment guidance website can help you take this decision most effectively with careful attention paid to the exclusive requirements of your commercial venture. If you have developed a new product and want to get it off the ground, investment guidance websites will give you the correct guidance to launch you business venture successfully. In many cases, prospective businessmen are also on the lookout for businesses for sale. Depending on your specific business requirements and commercial goals, investment guidance websites working for this purpose will inform you on the most suitable businesses available for sale at any given point of time. From Investors and Angel investors to venture capitals, investment guidance websites provide you information on just about each and every aspect of your commercial venture.

If you are already running a successful business and want the right strategic planning to expand it further, finding the right kind of capital and business partner often forms one of the chief aspects of your strategy. Investment guidance websites help you find the right capital for your commercial requirements and according to your specifications and particular needs, find you the best business partners. If you are looking for the best scope to sell off your business with best exposure of your products and generation of maximum profit, these investment guidance websites provide you customized guidance so that you get the best deals in selling off your business in shortest possible time. While advertising for your franchise and looking for the best applicants, investment guidance websites can help you with proper insight for selecting the people most competent to meet your business requirements and take your commercial venture to new heights.

In addition to the amount of capital, making the right financial investments at the right time plays a crucial role in giving your business a great start and profitable progress. For the best commercial progress, you have to know exactly where to invest your capital. Investment guidance websites provide you the right type of financial guidance so that at every step you can make the right business investments and thereby, generate the best possible revenues in shortest possible time. For many entrepreneurs and newcomers into the domain of commercial venture, starting a business involves borrowing a lump sum amount of capital from a reliable source. In most cases, banks play a central role in providing this financial capital to business-starters. However, as the rates of interest charged by the banks in these cases are significantly higher, businessmen often seek more affordable means of obtaining the business loans. Investment guidance websites provide you information on many other alternative sources, in addition to banks and financial companies, from where you can conveniently borrow the required amount of capital for starting your business enterprise.

Investment guidance websites are complete online business directories designed to help you in making the right business decisions and make the right commercial moves at the correct points of time in order to gain the best business revenues and flourish your commercial enterprise in the best ways possible. They can prove to be extremely helpful if they are properly utilized for your business goal.

Do you think you need an Investment Advisor? Hold on before you answer because this is sort of a trick question. Also, I am definitely biased because I am an Investment Advisor. Nonetheless, I think I can assist you in looking at this issue in a way that will serve you.

Working with a fair number of investors over the last nearly 20 years, I have observed that while most are intelligent people, and many are fairly knowledgeable about the market, they are, as a group, not terribly successful with their investing.

Why should they be? More likely than not they have made their living doing something other than investing, so why would they think they can do what a professional does better than a professional? (After all, they go to professionals for health care or for car repairs when needed!)

Most investors—even some professionals—tend to be “off” in their timing: they buy things when they are hot, not when they are cold. But for the greatest benefit, it should be the opposite. The media doesn’t help much when it comes to this buying approach, and let’s face it; greed and fear play a large part in most peoples’ investment decisions.

I truly believe the majority of people would be better of (that is, they would end up with more money at the end of the day) if they used professional money managers to advise them on their investing. Specifically I am referring to Registered Investment Advisors with proven track records of performance in investing in stocks, bonds, mutual funds

Let me burst one myth right off the bat: You don’t have to be a millionaire to engage the services of a topnotch advisor. Some people think you need to start an account with ,000 or more to get a really good advisor. Well, you may have more choices if you’re at that level, however you can find very successful Investment Advisors who will accept opening accounts for as little as 00.

There are literally thousands of Registered Investment Advisors in the US. Just what do they do—what service do they provide you? They do the legwork; the research and analysis. Maybe more importantly, they keep their primary focus on the markets, and specifically on their specialty area like individual stocks, mutual funds, or bonds.

Because they spend the bulk of their time and energy researching, considering, and analyzing, they naturally have a greater sense of the market and its movements than those of us who don’t put this kind of attention into it. So, with the right advisor, you can keep your focus on what you want—like your business or your retirement or whatever—and still get the information you want and need to invest wisely.

How Do You Find The Advisor for You?

Since there are good Investment Advisors and bad ones, how do you find the former and avoid the latter? Good question, and there are some keys. Most large brokerage firms list the Investment Advisors they work with and maintain information about their past performance. This is not a foolproof resource, though, since they tend to recommend the Investment Advisors who invest in their products or clear their business with the firm. So if you pursue this avenue, you need to watch for conflict of interest issues.

You can always subscribe to one of the numerous database services that include information, and sometimes rankings, on Investment Advisors. These services tend to be fairly pricey, though, so they may not be your best choice. Another option is to find articles (yes, like this one) or free newsletters written by Investment Advisors. If you find one or several that make sense to you, check out the IA and see if there’s chemistry between you.

When checking out advisors, here are some things to keep in mind:

1. Verify their record — look over their past performance;

2. Consider their system. Will it work in different market environments?;

3. As best you can, check out their operation and

4. See if they’ve had regulatory problems.

5. Equally important as doing your due diligence is making sure there is good communication between you and your advisor and that you trust this person with your money choices.

Another quick free way to scan through a select database and find a wide variety of candidates is with www.wiseradvisor.com. I’m registered there myself as an advisor and know that the company did a background check regarding registrations and regulatory issues.

An important question to ask is the how the advisor gets compensated. You want to stay away from commission junkies or salesmen disguised as advisors. I believe that you will get the best unbiased advice from someone who is paid a management fee based on the value of the assets that you entrust them with.

To take it one step further, ask if the advisor invests his own money in the same methodology that he recommends for his clients. If he doesn’t, ask why. If you don’t like the answer, close your check book and run as fast as you can.

Choosing an Investment Advisor can yield long-term high profit benefits. I encourage you to consider it if you haven’t before. However, as with any relationship, make sure there’s a fit before you jump into it.

Usually people don’t choose financial advisors; they simply get in touch with them. Many a times in some private banks you will find a super consultant or super advisors who will sell you everything like insurance, credit card, and even mutual funds. Banks are distributor of mutual fund and not the advisors.

Mind it; if you are investing advice from any bank you actually take advice from a distributor and it that case it is not necessary that you get a fair and quality advice.

An adviser should be one who can provide his customers with real value based advice rather than simply pushing sales in order to earn a better commission. Advisor’s role assumes significant importance in an exuberant scenario like the present one, when it is easy for investors to lose track of their objectives and make wrong investment decisions. Conversely, an association with the wrong investment advisor can spell disaster for investors. We present a few pointers which will help investors gauge if they are with the wrong investment advisor.

If the Advisor is offering rewards in terms of payback.

Select an advisor for his ability to recommend the right investment avenues and manage your investments rather than his willingness to refund commission. By offering payback the advisor is not doing justice to his to his work as he is luring you towards doing that investment. This specifies that an advisor is putting your money at risk by giving you commission.

This practice (widely prevalent despite being explicitly prohibited) among investment advisors is to rebate a part of commission earned, back to investors i.e. the investor is ‘rewarded’ for getting invested. What investors fail to realize is that the commission offered by the advisor is actually reward for taking more risk. Wealth creation for investors should come from the investments made and not commissions. Select an advisor for his ability to recommend the right investment avenues and manage your investments rather than his willingness to refund commission.

The advisor only advices top few funds most of the time.

Most of the time an advisor will suggest you some fund and will show you its annual returns. Most of the top ranking funds are sectoral funds and they carry a certain amount of risk. Usually sector funds being a fund with major allocation to specific sectors they are high risk funds. Many times in order to generate large funds from the market the fund houses have fallen prey to herd mentality and launched similar offerings in quick succession. The banks and investment advisors have played their part by indiscreetly pushing these products since they get better commission.

Think again before you take suggestion from such advisors.

If the advisor always have an NFO to pitch for.

Investment advisors have earned well through the mutual fund New Fund Offer’s by convincing investors that it is cheaper to invest during the NFO stage. But be careful this is not the truth. Mutual fund distributors and advisors mostly take benefit of the lack of knowledge on investor’s part by pitching the mutual fund NFOs as stock IPOs, distributors have only discredited themselves by not being true to their investors. Advisor should only recommend a new fund if it add value to the investor’s portfolio or is a unique investment proposition. Any advisor who is true to the profession will pitch for an existing scheme which has a good track record and proven rather than a similar scheme in its IPO stage.

If Advisor’s role is restricted to delivery and pick up of forms.

Investment advisor’s primary role includes creating a portfolio for the investor based on his needs, risk profile and successfully managing the same. While maintaining high service standards is pertinent, it shouldn’t gain precedence over the advice part. Most of the advisors I have seen are usually working for big distributors such as banks, big brokerage houses. The main work for them is meeting the targets rather than provide value base advisory service. Independent individual Investment advisors prefer to make their work simpler by showing them selves only when they had to collect the form.

For undergrads and MBA students, the news that they have been selected for an interview at an investment bank comes with both excitement and dread. A position as an analyst or associate in corporate finance can be the first step towards a highly successful and highly lucrative career. Investment banking interviews, however, can be some of the most intimidating interviews out there, so let’s take a look at how to get prepared.

 

 

Before we jump into interview practice mode, we should take a step back and think about how we want to come across in the interview. In short, investment banking candidates should come off as bright, confident and likeable.

 

In the final cut of selecting a hire, investment banks have already determined which candidates are smart and capable, so the decision comes down to who they like the best. So in addition to knowing a thing or two, candidates must remember to come across as a fun person to work with as well.

 

 

Like any interview, candidates should have stories prepared about their lives that discuss their past, present and future. These are great answers for the standard questions:

 

“Tell me about yourself.” Or “Walk me through your résumé.”

“Why are you interested in investment banking or this firm?”

“Where do you see yourself in five to ten years?”

 

Candidates are highly likely to receive these or similar questions in any interview, and having succinct, practiced answers to them will give the impression of a polished candidate.

 

Your past story should highlight events that have qualified you for or gotten you interested in investment banking. Your present story should demonstrate why you want the particular position, how it is a logical step from where you are coming from and perhaps touch on where you hope the position will lead.

 

Your future story should discuss how investment banking will lead to where you want to go. Good future ambitions might be a managing director position in investment banking, a principle at a private equity firm, a CFO or perhaps and entrepreneur. In any case, you should communicate that those are long-term ambitions and you look forward to the experiences you’ll have in the position you’re interviewing for.

 

 

Where investment banking interviews begin to get trickier is that firms will expect you to know what you’re getting into. If you confuse an equity analyst position with an analyst position in corporate finance, for example, you will not make it any further in the process.

 

You should understand the major divisions within an investment bank — sales & trading, corporate finance, research, etc. You should understand the hierarchy of positions within corporate finance — analyst, associate, vice president, managing director — and what each position does.

 

At the macro level, you need to understand the major differences between bulge bracket investment banks, middle market and boutique investment banks. You should also have a good answer for why you would prefer one type over another (and be sure that you prefer the type you’re interviewing with).

 

You should also understand the particular expertise that your firm has — transaction types or business sectors where it is active. Find some recent transactions that the firm has completed and be able ask smart questions about some of them.

 

You may be asked if there are any other firms or companies that you are interviewing with. If you are interviewing with other investment banks, you can be honest and say that you’re taking the opportunity to get to know the investment banking landscape. You want to communicate that you’re most interested in the firm you are speaking with and be able to give good reasons why.

 

Most banks will see it as a plus that you are interviewing elsewhere and may be more inclined to try to hire you. If you don’t have other interviews with banks, be sure to network and talk to people at other banks. If you can respond that you’ve at least been doing some networking in the industry, you’ll come across as a stronger candidate.

 

 

Candidates should also know what they’ll be working on when they come to investment banking. Having a basic understanding of pitches, deal execution and the ebb and flow of the corporate finance office is important.

 

To that point, you should also be familiar with some of the financial models you will likely be using — discounted cash flow, comparable companies analysis, precedent transactions analysis (sometimes called M&A comps) and LBO analysis.

 

Understanding how these models work and the theory behind them will help you to answer a lot of the technical questions that might get thrown at you in an interview. Know the capital asset pricing model (CAPM) and how to calculate the weighted average cost of capital (WACC). Know how to un-lever a beta.

 

 

Be sure to get up to speed on financial markets. If you can read financial news regularly and follow the reports of an economist or two, you’ll be prepared to answer questions that might get thrown at you about the markets:

 

“Where do you see interest rates headed over the next six months and why?”

“Where did the Dow close yesterday?”

“Do you have any stocks that you follow? Tell me about them.”

 

 

Another type of question you may encounter in an investment banking interview is a brain teaser. These questions are meant to catch you off guard and see how your mind works.

 

“How many golf balls will fit inside Yankee Stadium?”

 

You should be able walk through your thought process and come to a logical answer, even if it’s not the right one. You could say:

 

A golf ball is a little over two inches in diameter, so you could fit about five across in one foot of space or 125 in a cubic foot. It’s about 400 feet from home plate to center field, so Yankee Stadium is about one thousand feet long.

 

It’s shape is like a half sphere, so you could use the formula for the volume of a sphere — four thirds pie r cubed — divided by two to calculate the volume in feet. Then you multiply by 125 to figure out how many golf balls would fit.

 

That would be an adequate answer to a brain teaser. If any of your assumptions are wrong, it doesn’t matter as much as your logic. Get out a piece of paper during the interview and write out your assumptions if you need to. Get a hold of a list of brain teaser questions and have someone practice with you.

 

 

Before the interview is over, you should always ask some good questions. There has been a lot of change in the investment banking landscape, so there are lots of great questions to ask:

 

“How has the merger with such-and-such firm gone?”

“How has the role of private equity changed since the financial crisis?”

“Do you foresee a surge in M&A activity in any of the industries you work with?”

 

There are many more questions out there. You will usually be given an opportunity to ask questions, and this is your chance to take control and show that you’re prepared. Write some smart questions out before the interview and take them with you. No matter what questions get thrown at you, you can at least demonstrate that you can ask smart questions — a valuable skill in investment banking.

 

 

When you finish the interview, be sure to smile and thank the firm for talking with you. Try to get a hold of business cards and send thank you emails when you get home.

 

For on-site interviews, be sure to treat everyone you encounter with respect including administrative assistants, analysts and associates. Even analysts may have the opportunity to comment in the hiring process of associates, so it’s important to make a good impression on everyone.

 

Be patient with the hiring process. Ask about the firm’s hiring timeline and respect it. Don’t follow up until after their deadline has past.

 

Investment banking interviews can be some of the toughest you will come across in your career, so be sure to take preparation seriously. Focus on coming across as a bright, confident and likeable candidate, and you will put yourself in the best position to get hired.

 

Try a practice interview simulation.

 

Want to learn about comparable companies analysis and see a sample model? Visit Finance Ocean. Or try taking a finance quiz!

 

 

Morgan Stanley was named the Best Investment Bank in Asia for 2008 by Asiamoney magazine, a leading Asia finance magazine. It has also received many top awards such as the Best Foreign Investment Bank in China (The Asset), Best Real Estate Investment Banking in China (Euromoney), Best Asian Investment-Grade Corporate Bond: SK Telecom’s US0MM 20-year senior notes (Euroweek), and so on.

Credit Suisse is one of the best European investment banks, offering a broad range of financial advice in the aspects of private banking, investment banking and asset management. The bank has received numerous awards, including the “Best Wealth Management House” in the Euromoney Awards for Excellence, “Best Bank in Switzerland” in The Banker magazine’s 2010 country awards, and so on. In Euromoney’s global “Private Banking Survey 2009″, Credit Suisse was rated the best for its private banking services in Switzerland.

Deutsche Bank has been named the Best Investment Bank in the UK. It offers a comprehensive range of banking services including commercial and investment banking, with the use of state-of-the-art technological facilities in the UK. Deutsche Bank has been ranked Number One for the first time on Institutional Investor’s 2011 All-Europe Research Team, the magazine’s 26th annual ranking of the region’s best sell-side equity research analysts. Additionally the Bank was recognized for its strong commitment to developing and retaining talent in the Hay Group’s ‘Best Companies for Leadership’ 2010 study.

Kotak Investment Banking is one of the best Indian investment banks, offering a range of advisory solutions to leading domestic and multinational corporations, financial institutions and others. It was named the Best Investment Bank in India by FinanceAsia in 2006, 2007, 2008, 2009 and 2010, as well as the Best Bank for Equity Finance in India in the Euromoney Real Estate Poll 2010.

Macquarie Group is a leading provider of financial, advisory, banking, investment and funds management services, with global offices in the world’s major financial centres. It has been consistently recognized with various financial awards, including the Best Domestic Investment Bank (Australia) by The Asset, Best Debt Finance Deal (Australia) – Carlyle and TPG’s acquisition financing for Healthscope by FinanceAsia, to name a few.

Please visit the relevant guide for more information on the list of world’s top investment banks.

                                         

                                                    By A. Daniel Woska

 

 

            The object of your affection, your most precious property, the thing you have worked to accumulate for years is systematically and intentionally placed in the hands of someone who professes to be an expert in investing your property. The person has explained that he is a “Registered Investment Adviser” licensed pursuant to the 1940 Investment Adviser’s Act and someone who had to study for a very difficult exam.  He looks good, he sounds good, he explains he is investing money for hundreds of clients in one thousand different accounts. You have previously interviewed three other prospects and you are weary of the interviewing prospect and all these RIA’s sound the same and this one has a large office with nice furniture and a radio show as well as very plush furniture and surroundings so you say “OK, I will hire you to be my “Registered Investment Adviser”.

 

            A contract is presented that contains multiple pages and says it is an “Investment Advisory Contract” so it must be some protection for you.  You never consult with an attorney who is familiar with the narrowly practiced areas of “Securities Law” or  “Investment Law” to gather even a minimal understanding of the contract. You fail to call your CPA to discuss what this Registered Investment Adviser is proposing for you to do with your hard earned money before you accept his proposed investment portfolio.  Nope, you do nothing to better understand what this professional sounding person is getting ready to do with your money and to you.

 

            The truth is you have no idea, not even a rough understanding of what you should be asking  this Registered Investment Advisor.  You are so unsure of what technically is required to make appropriate investments that you are forced to rely on a third party to make the decisions. When a stock broker or a financial expert begins to talk about the fundamentals of an investment strategy you hear things that remind you of your last algebra, trigonometry or calculus class.  You were not fond of  those particular subjects when you took them 30 or 40 years ago and are even less interested in trying to embrace these complex mathematical functions today.

 

            This is the “Investment Understanding Gap” that produces billions of dollars in losses to millions of investors.  The average citizen of the United States of America has not spent a lifetime investing, they have spent a lifetime working and earning. The average American invests substantial monies with a Registered Investment Advisor, a Certified Financial Planner or a Stock Broker once in their lifetime, when they retire. Therefore not only are virtually all Americans financially illiterate but more than half are “sucker” for overblown charlatans who impose their appearance of success on the unsuspecting retiring man who has money, stock or stock options which have been accumulated over years of hard work to earn this money to live on in retirement.

 

            Remember one thing and it is one very important thing to remember: “If your Registered Investment Advisor, Certified Financial Planner or Stockbroker guide you into incorrect and risky investments they will disavow any responsibility 99.9% of time.”  Think about that for a minute you are turning over all your hard earned money which you cannot go back earn again, to a stranger who talks about things you do not understand and you believe you are safe for the long run.  You are not just incorrect, you are financially dead wrong.  These people will not cause you to die physically, but they nhave no reservation or hesitation in telling you you have died financially and that you need to save more money because you have been so foolish with your investments.

 

            So let me say it this way.  If you have loaded up the wheelbarrow full of money you have been hiding in your employers 401k or pension plan you are in serious danger.  If you tell the Registered Investment Advisor, Certified Financial Planner or Stockbroker that you are willing to take “any” risk with your money, you have now given this trusted advisor the right to lose all your money in exceedingly risky investments with impunity and then tell you when you ask for an explanation that “You said you wanted to take risk, you did and it turned out bad for you.”  They will never say “I made a mistake let me refund your money”, never.

 

            If you are even considering investing with a Registered Investment Adviser there are things you absolutely need to request to be reviewed by you and either a knowledgeable Securities Attorney or a knowledgeable CPA or someone with detailed understanding of  alpha, beta, asset allocation, the modern portfolio theory, standard deviation, correlation, morning star and index funds.  If the person you choose to talk to cannot easily explain these things to you, they will really n ot be much help in your analysis.  You should seek someone who understands the risk side of investments, the regulatory side of the Registered Investment Adviser world and someone who is not interested in selling you anything.

 

            Registered Investment Advisors, Certified Financial Planners and Stockbrokers may be wonderful, kind, caring, friendly and considerate people and know absolutely nothing about how to ask you the questions that need to be asked before proposing any type of investment portfolio.  These folks may seem smart and knowledgeable and still know nothing about proper asset allocation, modern portfolio theory or correlation.  These professional sounding people who wear nice clothes and drive nice cars are simply sale pitch men and women who honestly believe they can help you but actually have no way to accomplish real help in most cases.

 

            Let me use an analogy.  If you go to a dentist you believe he is trained and licensed to work on teeth, same with a doctor of medicine, same with a professional architect attorney or engineer.  When you you go to people for professional help you expect them to be professionally skilled. While there are certainly bad dentists, doctors, lawyers, engineers, and architects they have been trained and licensed in the practice of an area of the professional realm that required hard study of difficult concepts over many years of fulltime classroom study and years and years of additional graduate school studies and additional testing and then eventually the big test needed to get licensed by the state in which they practice.  Registered Investment Advisers, Certified Financial Planners are not required to do much more then attend some classes a few times a month and then take a licensure test like a real estate salesperson or an insurance salesman.  This is not meant to say that sales people are undereducated, it is to say watch out before you choose to invest your money with someone claiming to be a Certified Financial Planner because they may have little or no real appreciation of how to do anything but sell you a group of arguably diverse mutual funds and tell you that is asset allocation, and truly believe it in their hearts making their sales pitch to you even more convincing.

 

            Before choosing anyone to professionally invest your money please cautiously and humbly ask for the following information:

 

A copy of their most recently filed Form ADV. A current copy of a Full Legacy CRD on the individual advisor who is handling your money A list of all clients he and his firm are currently servicing, redacting the names for privacy purposes but to see how busy he is going to be while helping you A print out of the Financial Fundamentals and Risk Fundamentals on each mutual fund being proposed An overlap report on each fund which is proposed to see how many of the stocks held in each fund or the same stocks. A full understanding of  index funds and bond funds which are available A copy of the Fund Agreement between either he or the wire house and the fund company involved in each fund.  They have one and you are entitled to see it. Ask for a copy of the financial arrangement the Registered Investment Advisor has with the wire house in order to find out what you pay for you buys and sells and what the Registered Investment Advisor makes off of the same buys and sells. The name, phone number, e-mail and address of the compliance person responsible for auditing this particular Registered Investment Adviser. A copy of the most recent audit and the full audit file with all correspondence.

 

 

If your Registered Investment Advisor is still interested in helping you after these document ts are requested you may be making progress in your decision making.  If your proposed Registered Investment Advisor is unable or unwilling to produce any of these documents due to confidentiality problems you better tread lightly.  This type of attitude is likely caused by something and perhaps many things which the wire house, the mutual fund company or the Registered Investment Advisor want to keep from you.

 

      A Registered Investment Advisor is not just a stockbroker placing trades, he is your fiduciary who has to always, 100% of the time, put your interests in front of his own professional interests.  It is rare for a Registered Investment Adviser to grasp this concept due to all of the conflicts of interest which are typically part of their practice.  The Registered Investment Adviser will always have conflicts on the fees and commissions you pay to him and the funds he picks. The funds all charge different 12b-1 fees some higher than others.  There are funds that actually provide trips, parties and traveling seminars to Registered Investment Advisors in order to generate business.  Obviously there is no math involved in a decision to sell funds for a company that provides great perks for him and a significant other. These Registered Investment Advisor fiduciaries often have secret unknown financial deals with wire houses, fund managers, and even themselves.  For example, I am aware of a very popular and well known East Coast Registered Investment Advisor who actually charged clients a management fee on their personal cash account ts and thon the value of the personal stocks they simply placed in the account t he opened for them.  The clients never understood that not only were they not making money on this cash, he was charging them almost 1% annually to hold their cash.  Again, legally speaking, as a fiduciary, this person was supposed to put the best interests of the client in front of his own. Perhaps the most troubling aspect of this revelation is that this particular Registered Investment Advisor has 500 accounts and hundreds of millions of dollars under management in probably the exact same way.

 

      In addition to the questions above you must also consider the  regulatory side of the life of a Registered Investment Advisor.  Who is responsible for catching and weeding out the charlatans?  The first line of weeders are the compliance officers responsible for the actual compliance with the rules and the law by the SEC, NASD and NYSE.  Unfortunately this is a go along and get along business and when the charlatan is a big producer paying lots of salaries, the first line of weeders is willing to look the other way until the Registered Investment Adviser is caught by an arbitration panel in a case by a public customer.  Once the charlatan is exposed by the customer, things may change.