Happy Clients; Terrified Prospects

Four years ago, on March 9th, 2009, US stocks collapsed to a 12 year low.   A financial crisis rooted in overleveraged purchases of junk (or even fraudulent) securities claimed, in quick succession, Bear Stearns, Lehman Brother, Merrill Lynch (forced into a shotgun marriage with Bank of America) and AIG. Investors panicked, selling good securities at deep discounts to fair value.

Our own clients were not immune - 6 families fired us in March 2009, which signaled the moment to take the remaining clients fully invested. Four years later, those clients are at record levels in their portfolios net of deposits and withdrawals (not surprising as the major US averages have also returned to record levels.)   More importantly, the 30% of our clients who depend on their portfolios for their retirement received their monthly draw without fail through the entire crisis. Meanwhile, millions of other investors have had the miserable experience of going to all cash during the crisis, only to watch stocks rally 144% over the next 4 years.

We're not Bernie Madoff!

Prospective clients recognize that they can't retire with their all-cash strategy, but they're terrified to start investing again.   These prospects don't trust the banks, don't trust the government, don't trust the media and don't trust advisors like us. Every initial conversation starts with us explaining how we're not the next Bernie Madoff. Specifically:

  1. We don't self-custody - we always work through a third-party custodian - "trust, but verify!"
  2. Our clients' funds are always held in separate accounts.
  3. We only invest in liquid, publically traded stocks, bonds, mutual funds. If you can't look up a security on Yahoo Finance, it can't be in your portfolio.
  4. We send monthly performance statements, which have to match up with the monthly custodian's statements mailed directly from the custodian.
  5. Our clients can review their accounts online at any time.
  6. We have no lockups - a client can withdraw funds at anytime and can cancel their relationship with us at anytime.
  7. We have no access to our clients' funds other than to submit our monthly advisory fee.
  8. We provide a detailed report monthly of how our advisory fee was calculated.
  9. We give references - cheerfully!

Read the entire commentary here.