A few months ago I got a phone call from a young lady asking me to purchase a book to give to my clients. The title is “The Vigilant Investor.” She went on to say that the book told stories of ponzi schemes and crude stock brokers and how investors should protect themselves. I told her that this sounded scary. As the conversation progressed, I discovered that the author, Pat Huddleston, and I have a common acquaintance. I asked the young lady if she could schedule a lunch with Pat and our friend. Within the next month, the lunch date was set.
The last place that any financial advisor wants to find himself is with a securities attorney. Especially one from the SEC. For this lunch, I found myself sitting with Pat Huddleston, former SEC enforcer, attorney and now author. Joining us was Mike Bishop also an accomplished securities attorney here in Atlanta. Both go after bad financial advisors for a living.
At this lunch, I was sitting with the “good” guys observing the dark side of my industry. We talked about those terrible variable annuity products. We discussed some of the local ponzi schemes that had taken place over the years. Near the end, Pat and I discussed his book, “The Vigilant Investor.” I have to say that I have met several authors over the years, mostly financial writers, all of whom are very proud of their accomplishments. I found Pat to be humble, intelligent and very determined to help the individual investor protect their investments from fraud. I promised Pat that I would read his book.
Reading the book as a financial advisor has a different feel than a non industry individual reading the book. While my firm would be able to pass Pat’s vigorous “good” advisor criteria, at times I found myself taking notes to help sure up my firms transparency and how we interact with prospects. I understand that clients trust me and that we have safeguards in place to look out for the clients’ best interests. But what if our clients were introduced to any of the smooth talking, real life characters that Pat displays in his book? Certainly their life savings would be gone either by out right theft or a slow death through an annuity. This reality is scary to me.
This book lays out the threats and tells the readers how to look for the signs of trouble. One of my favorite parts of the book is where Pat says he hopes that a broker someday will be able to tell his prospects the unvarnished truth about annuities. He goes on with a script that such an advisor would read. Fees 3% per year, 10 years to get out without a penalty, so the fees will cost you 30%, if you want a bonus for investing, that’s fine, but the fee will be 4% to cover the cost of the bonus…. Pat acknowledges that this will never happen, but it is still fun to dream.
From my prospective the book is filled with dark stories of greed and deception. Yet it is these stories that investors need to read to understand the reality of what can happen if investors are not vigilant in their search for a financial advisor. The book confirmed why I left AXA Advisors in Atlanta to start my own Fiduciary Fee Only advisory firm over a decade ago. The book also confirmed my dislike of the business model of independent advisors that are also registered as commission brokers. This model defines the term conflict of interest.
You can go with your gut when choosing between steak or chicken. Use knowledge to choose an advisor. This book will help you do that.
You can easily judge the character of a man by how he treats those that can do nothing for him. James D. Miles
- Thursday Feb 11 - 12:58am
When viewed over a 10-year period, about 92% of actively managed eurozone equity funds trailed their respective benchmark. #index
- Sunday Feb 7 - 4:11am