Archive for the ‘Capstone’ Category

Today Senator Dodd dropped from his financial reform packet the demand of a fiduciary duty on those who give investment advice. Simply put, this means that you the client will continue to be taken advantage of by the vultures that put themselves first at all times and that this will remain legal!

There are a myriad of financial products that will continue to be sold due to their high commissions and the story selling that surrounds them. Whether they are appropriate for you will continue to be up to you to determine. Of course, whether these are good solutions for you or not will require you to study investments and financial planning for a few years as many of these products are complex and intentionally opaque. An equity indexed annuity is a prime example of the difficulties you will encounter in understanding and evaluating whether something is a good investment. Not only are these complicated (though the sales pitch is simple), but you are unlikely to know about similar or better products available with FDIC insurance that may be preferable. Why won’t you know about them? Because they pay far smaller commissions so they will not be presented by sales people who do not have to put your interests first.

The thought that you would pay someone for investment advice (whether that is by fee or commissions) who is not legally bound to at least try to put your interests first is absurd. That the financial services industry at this late date would campaign to avoid this level of responsibility is deplorable. Given all that we have gone through, you would hope that putting clients first would be acceptable to all moving forward.

What should you do? I think there are two questions that should be foremost in your mind when dealing with anyone in financial services (insurance, stock brokers, financial planners, etc.). First, ask them if they are acting as a fiduciary? If they do not respond in the affirmative, make sure you ask them how they are compensated for a transaction and how much they are compensated for the transaction. If they are not forthright in disclosing these answers (e.g. they say their compensation is built into the product and you don’t pay anything additional), then you need to run for the exits. If you get a reasonable answer, then you may choose to proceed with the transaction. Just remember-caveat emptor.

We wish you a warm welcome to our new blog, where we hope to keep you informed and “tell it like it is” in a manner which is rare in the financial services world. While most of the financial world is focused on the sales pitch du jour, as an independent Registered Investment Advisory we focus on our clients and their best interests. We do not sell investments for a commission, so we can focus solely on trying to make client accounts grow to meet their objectives. Our revenue is directly linked to client’s account performance, so we always need to have our client’s best interests at heart – they are the same as our best interests.

As a result, we intend to use this space to keep you apprised about how we see the economy, the opportunities for meeting your financial objectives, and direction of the financial services industry. We will pull no punches in trying to keep you informed in a unique and entertaining way. We hope you enjoy this blog as we move forward and please feel free to share your feedback with us.

Ted Schwartz, President of Capstone Investment