My own experience will illustrate the problem. I attended an investor meeting with the head of our Chicago office. We both thought the meeting went extremely well. The investor asked thoughtful questions and we had good answers. We also had a very competitive track record and charged reasonable expenses for our knowledge, advice, and services.
The Chicago manager and I were both a little shocked when we were told the investor selected a money manager in Boston. He said the firm employed five Harvard MBAs, who were also CFAs, and their track record was 10% per year higher than ours. We had never heard of this money management firm before, but wrote it off as a loss and moved on.
About one year later, there was an article in the Wall Street Journal saying the SEC had shut this firm down. The owner of the company had made everything up: The staff, the credentials of the staff, the track record, and a glossy marketing brochure that even had photos of key staff surrounded by a lot of computers. Interestingly, the fake firm was on the approved lists of several wirehouses due to its enviable track record and exceptional staff. In two years, he had amassed $330 million of assets under management working out of a spare bedroom in his home. Continue reading →
Paladin began providing services to investors in 2003 when its book, “Who’s Watching Your Money?” was published for the first time. This book set the standard for vetting financial advisors to determine if they are using deceptive sales tactics to gain control of investor assets. Any financial advisor who uses deceptive sales practices cannot be trusted to provide competent, ethical financial advice. In fact, investors should avoid these advisors because they represent hidden risks that could be catastrophic. Continue reading 
