investor protection

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5 Numbers for Investor Protection

Every investor should be proactive in protecting their financial security. Many would argue that organizations such as the Securities and Exchange Commission (SEC) and the […]

Stockbrokers Disclosure Proposed Rule Pulled

FINRA has withdrawn a controversial proposed rule that would have forced stockbrokers to tell their clients why they decided to work at a given brokerage […]

Financial Services – Is there Investor Protection?

The media says financial services is one of the most regulated industries in America. If that is true, how do you explain headline after headline […]

How Is Investment Performance Manipulated In Up And Down Markets?

This article describes one of the more frequent ways financial advisors manipulate track records that are supposed to document their investment performance.

There are two reasons why investors must be very cautious when they select financial advisors based on investment track records. First, advisors know most investors will select the financial advisor with the best track record. Second, unscrupulous advisors will provide fake track records or they will manipulate track record data to make themselves look better than they really are.

Track records are one way investors can evaluate competence. Reviewing advisors’ education, experience, and certifications is the other way. Given a choice, most investors are biased towards track records because advisor comparisons are easy – just select the one with the highest track record. […]

How Do I Know I Am Getting Competitive Investment Performance?

There is only one way to know if you are getting competitive investment performance. You have to select a relevant benchmark and hold your advisor accountable for beating the benchmark’s return. If your advisor consistently outperforms your benchmark you should sleep better at night.

The returns that are produced by your advisor are impacted by the performance of the securities markets. If the markets go down, there is a good chance you will lose money. If the markets go up, there is a good chance you will make money. […]

How Can I Increase My Advisor’s Accountability for Investment Performance?

Every investor who relies on financial advisors to help them achieve their financial goals should be asking themselves how they can increase their advisor’s accountability for investment performance. Why ask the question? Most advisors go to great lengths to avoid accountability.

Here is an example. You select an advisor who convinces you to invest your assets in five mutual funds. You buy the recommended investments and you experience very poor performance over the next two years. Who is responsible for the bad performance, the funds or the advisor who recommended the funds? The advisor wants you to blame the funds so he can retain his relationship with you. He says it is not his fault the funds failed to deliver competitive performance. I disagree. The funds and the advisor who recommended them are both accountable. You should sell the funds and terminate your relationship with the advisor who sold you the funds.  […]