By: Jack WaymirecloseAuthor: Jack Waymire Name: Jack Waymire
Email: jack@InvestorWatchdog.com
Site: http://www.investorwatchdog.com
About: Jack entered the financial services industry as an institutional consultant and later as vice president at Warburg, Paribas, Becker in 1976. From 1983 to 2003 he was the President of Lexington Capital Management and related companies. In December, 2003 John Wiley published his book "Who's Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor". In 2004, he founded PaladinRegistry.com, a website that educated investors about financial advisors. A national Registry of pre-screened, five star rated advisors was added to the website later in 2004. In 2009, he founded InvestorWatchdog.com, a website that provides tools and information to investors who use the services of financial planners and financial advisors. Since 2004, Jack has been frequently quoted in the media on topics about financial advisors, Wall Street firms, investment scams, and the financial services industry (BusinessWeek, Forbes, Kiplinger, Washington Post, etc.).See Authors Posts (55) | January 26, 2012 | Investor Information

In a recent study conducted by PaladinRegistry.com and ByAllAccounts.com, a disturbingly high percentage of investors said they relied on financial advisor references to validate their ethics and performance.

This is disturbing at two levels. No advisor will deliberately give a prospective client a bad reference. In fact, references are carefully chosen to make sure they only make positive statements about the advisor.

The next level is even more disturbing. Unethical advisors may use friends, not clients, as references. Or, advisors act as references for other professionals in return for positive comments about themselves. None of this is disclosed to investors.

References are too easy to manipulate and are subjective (think Bernie Madoff). Investors need a new objective way to evaluate ethics and performance.

By: Jack WaymirecloseAuthor: Jack Waymire Name: Jack Waymire
Email: jack@InvestorWatchdog.com
Site: http://www.investorwatchdog.com
About: Jack entered the financial services industry as an institutional consultant and later as vice president at Warburg, Paribas, Becker in 1976. From 1983 to 2003 he was the President of Lexington Capital Management and related companies. In December, 2003 John Wiley published his book "Who's Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor". In 2004, he founded PaladinRegistry.com, a website that educated investors about financial advisors. A national Registry of pre-screened, five star rated advisors was added to the website later in 2004. In 2009, he founded InvestorWatchdog.com, a website that provides tools and information to investors who use the services of financial planners and financial advisors. Since 2004, Jack has been frequently quoted in the media on topics about financial advisors, Wall Street firms, investment scams, and the financial services industry (BusinessWeek, Forbes, Kiplinger, Washington Post, etc.).See Authors Posts (55) | January 25, 2012 | Conflicts of Interest, How to Select Advisors

Financial planners, financial advisors, investment advisors, and money managers are financial fiduciaries. That’s because they are Registered Investment Advisors (RIAs) or Investment Advisor Representatives (IARs) who work for RIAs. What does this mean to you, the investor?

Fiduciaries are held to the highest ethical standards in the financial services industry. They are required to put their clients’ financial interests ahead of their own. In other words, your financial interests come first.

Non-fiduciaries are held to a lower ethical standard called suitability. In a nutshell, a suitable investment means that an investment is appropriate for an investor’s willingness and ability to take on some level of risk. Here’s a good article that explains suitability in more detail.

If you’re looking for a new financial advisor or your first financial advisor, make sure you select an RIA or IAR and require them to acknowledge their fiduciary responsibilities in writing. Remember: it’s your money so the financial professional you hire should have the highest level of accountability back to you, the client!

By: Matthew Arndt, CFA, CPA, CFP | January 24, 2012 | Bad Products & Services, Investor Information

You may not realize this, but if you own mutual funds in your portfolio then you may be paying substantial fees to each mutual fund manager every year, in addition to an annual advisory fee to your investment advisor (An advisor simultaneously collecting both a commission and an advisory fee on the same portfolio is an extremely unethical act known as Double Dipping, please see my earlier post).

Mutual funds charge annual management fees and hidden 12b-1 expenses that can cost you on average about 1.5% a year and many of these funds may not provide you any better diversification than an index fund or ETF that only costs you 0.20%. Imagine if you are paying your advisor an additional 1.5% annually to put you into these funds; your annual investment cost would reach 3% per year. These may not seem like big numbers, but compounded over decades these fees could erode a very large portion of the value of your portfolio.

Costs matter – tremendously.

By: Jack WaymirecloseAuthor: Jack Waymire Name: Jack Waymire
Email: jack@InvestorWatchdog.com
Site: http://www.investorwatchdog.com
About: Jack entered the financial services industry as an institutional consultant and later as vice president at Warburg, Paribas, Becker in 1976. From 1983 to 2003 he was the President of Lexington Capital Management and related companies. In December, 2003 John Wiley published his book "Who's Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor". In 2004, he founded PaladinRegistry.com, a website that educated investors about financial advisors. A national Registry of pre-screened, five star rated advisors was added to the website later in 2004. In 2009, he founded InvestorWatchdog.com, a website that provides tools and information to investors who use the services of financial planners and financial advisors. Since 2004, Jack has been frequently quoted in the media on topics about financial advisors, Wall Street firms, investment scams, and the financial services industry (BusinessWeek, Forbes, Kiplinger, Washington Post, etc.).See Authors Posts (55) | January 19, 2012 | Investor Information, Performance Reporting, Watchdog Benchmarks, track records

There are three performance numbers that should matter to you.

First, is your performance goal. Let’s assume you have to average a 10% rate of return to achieve your financial goals.

Second, is your absolute performance. What return did your investments deliver? If your performance was 10% then you achieved your financial goal for that year. You should also differentiate between gross and net returns (after expenses are deducted). You may find your 10% return became 8% in which case you lagged your goal.

Third, is your relative performance. This is the number that really matters. How did your investments perform compared to a benchmark. For example, your absolute return was 10%, but your benchmark was up 20%. On a relative basis you lagged your benchmark by 50% – not so good.

Relative return benchmarks also tell you how you performed during negative years. For example, your benchmark is down 10%, but your portfolio’s performance is only down 5%. On a relative basis you win because you lost less.

Investor Watchdog is launching a new website in the next few weeks that contains five sophisticated performance benchmarks. Some of the benchmarks have up to 12 asset classes and they use varying asset allocations to reflect different tolerances for risk. You select the benchmark and we monitor your results for you.

By: Jack WaymirecloseAuthor: Jack Waymire Name: Jack Waymire
Email: jack@InvestorWatchdog.com
Site: http://www.investorwatchdog.com
About: Jack entered the financial services industry as an institutional consultant and later as vice president at Warburg, Paribas, Becker in 1976. From 1983 to 2003 he was the President of Lexington Capital Management and related companies. In December, 2003 John Wiley published his book "Who's Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor". In 2004, he founded PaladinRegistry.com, a website that educated investors about financial advisors. A national Registry of pre-screened, five star rated advisors was added to the website later in 2004. In 2009, he founded InvestorWatchdog.com, a website that provides tools and information to investors who use the services of financial planners and financial advisors. Since 2004, Jack has been frequently quoted in the media on topics about financial advisors, Wall Street firms, investment scams, and the financial services industry (BusinessWeek, Forbes, Kiplinger, Washington Post, etc.).See Authors Posts (55) | January 19, 2012 | Illegal Schemes & Scams, Wall Street Business Practices, Wall Street Ethics, Wall Street Executives

According to 24/7 Wall St.’s research, Goldman Sachs has made it onto its 10 Most Hated companies list.

I am not surprised. The greed of GS executives has become legendary and their actions severely damaged investors and the U.S. economy. Exposure started in 2010 when the company was sued for fraud and settled for $550 million – a small percentage of annual profits. Fraud accusations against GS actually accelerated after the settlement and fines became a cost of doing business. GS is facing a number of suits for toxic mortgages it sold to individual and institutional investors.

Being on a Most Hated list must rankle GS executives, but they have made hundreds of millions of dollars in compensation and they know Americans have short memories. Eventually this will be old news and it will be business as usual.

What is truly amazing is that GS defrauded investors and caused major damage to the U.S. economy and not one company executive went to jail. Why not? These executives have purchased Get Out of Jail Free cards from politicians who care more about re-election than protecting Americans from greedy executives.

This cycle will repeat itself over and over again until the executives who made the decisions to rip-off the public begin joining Bernie Madoff in jail.

By: Jack WaymirecloseAuthor: Jack Waymire Name: Jack Waymire
Email: jack@InvestorWatchdog.com
Site: http://www.investorwatchdog.com
About: Jack entered the financial services industry as an institutional consultant and later as vice president at Warburg, Paribas, Becker in 1976. From 1983 to 2003 he was the President of Lexington Capital Management and related companies. In December, 2003 John Wiley published his book "Who's Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor". In 2004, he founded PaladinRegistry.com, a website that educated investors about financial advisors. A national Registry of pre-screened, five star rated advisors was added to the website later in 2004. In 2009, he founded InvestorWatchdog.com, a website that provides tools and information to investors who use the services of financial planners and financial advisors. Since 2004, Jack has been frequently quoted in the media on topics about financial advisors, Wall Street firms, investment scams, and the financial services industry (BusinessWeek, Forbes, Kiplinger, Washington Post, etc.).See Authors Posts (55) | January 17, 2012 | Advisor Monitoring, Investor Watchdog

I have not seen one yet.

Some investors say they trust their advisors so there is no reason to monitor them. Or, they believe the advisors are their friends and friends don’t take advantage of friends for money.

There is also the issue of time. Very few investors will commit the time it would take to to develop their own monitoring system. And, some investors may not know the right questions to ask.

Consequently, most investors let advisors monitor themselves. What’s wrong with this picture? No advisor will volunteer information that may cause the investor to terminate the relationship. They don’t volunteer information and they hope investors don’t ask the right questions and require responses in writing. This works for the advisor, but is very dangerous for investors.

Investors have to learn to protect their financial interests better.

Investor Watchdog can help. We are launching a quarterly monitoring service for advisors in February 2012. The service is free for investors.