TheMoneyGeek Unplugged

As you are probably aware, Bernard Madoff, former NASDAQ Stock Market chairman and founder of Bernard L. Madoff Investment Securities LLC, has recently pled guilty to all charges against him and will be in jail for a very long time.  Incredibly, I’ve recently spoken with several individuals and they seemed to not be aware of Madoff’s most egregious offenses.

What did he do?  Madoff collected money to invest from clients, made up false statements to show that they were doing well, and used new clients’ money to pay interest and withdrawals to existing clients.  This is known as a Ponzi scheme and is estimated to involve more than a $50 billion loss for his investors.

Bernard Madoff’s Ponzi Scheme stands as an example of how the financial services industry has failed to protect the best interests of consumers. It highlights the increased need for consumers to proceed cautiously when working with an advisor and the importance of asking pointed questions before hiring a professional.

His clients didn’t see this coming.  Could they have?  Let’s look at three key safety tips that would have prevented this from happening:

Know what you own.  Stay with traditional investment vehicles such as stocks, bonds, Exchange Traded Funds (ETFs) and mutual funds that are publicly traded and listed on major exchanges like the New York Stock Exchange.  They are valued independently at least daily, if not minute-by-minute, while the exchange is open.  With the exception of common trust funds, you should be able to access pricing and performance of your individual investments in the newspaper or the Internet.

Use an independent custodian.  Madoff held his clients’ assets, managed them, and priced them via internally generated investment statements.  Naturally the investment performance will look better if the prices reported to clients are manipulated, which is allegedly how Madoff showed winning year after winning year despite market turmoil.

For example, as a registered investment advisor, we have selected TD Ameritrade Institutional as the custodian for our client accounts.  TD Ameritrade Institutional, as an independent third party, prices the investments owned and provides monthly statements to clients.  We have no control or input on investment pricing.

Each money management client of ours signs a Limited Power of Attorney on their TD Ameritrade accounts.  This limited power of attorney only allows us to:

• Place trades in the account on clients’ behalf;
• Receive copies of monthly statements, tax documents and trade confirmations;
• Deduct our investment management and financial planning fees directly from the account.

While we can request a distribution on a client’s behalf (which must be mailed to their home address or transferred to another account in their name), our ability to withdraw funds from client accounts is limited to the payment of our financial planning and investment management fees.  Clients are always free to pay their fees by check and are never obligated to use direct deduction from their accounts.

Inquire about insurance.  Our clients benefit from fraud insurance.  Each client is insured with the Securities Investor Protection Corporation (SIPC) with coverage of $500,000 per account.  Keep in mind that fraud insurance does not protect against market declines; but it does protect against theft of securities or related fraudulent transactions.

Now as the post-Madoff era begins and the federal government and industry regulators decide the best course of action to protect consumers, people need to ask the right questions of an existing or potential advisor.

As a member of the National Association of Personal Financial Advisors (NAPFA), the country’s leading association of Fee-Only financial advisors, I encourage consumers to take the time to get to know an advisor and gauge his or her commitment to placing clients’ interests first.

Find out how the advisor and his or her firm are compensated.  Fee-Only compensation has the fewest conflicts of interest, but there are other acceptable methods as long as full disclosure takes place up front.  It’s important to know if an advisor will make additional money if you follow certain recommendations.

You should always know where your money and securities are actually held. As discussed above, most reputable advisors will use an unaffiliated custodian for the safe keeping of your assets.  This simple check and balance could have saved the Madoff investors millions by bringing the problem to the forefront earlier.

Legally, all clients are entitled to a copy of the firm’s Form ADV Part II or brochure.  It’s a compliance document that can be pretty dry reading, but it contains a lot of important information and ultimately shows that the firm is registered with the SEC or the state(s).  For an example, see our Form ADV Part II.

NAPFA and the Fee-Only advisor community are hopeful that the new administration, the SEC and other regulatory bodies will enact thoughtful regulations to protect consumers.

Consumers can access a Financial Advisor Checklist and Financial Advisor Diagnostic on the NAPFA website by visiting www.NAPFA.org and clicking on the Tips and Tools button in the Consumer Information section.  The Diagnostic tool includes an answer key to help consumers understand NAPFA’s recommendations for the most appropriate answers to the questions.

One final thought. One of the statements most widely used in basic investment course work is “if an investment sounds too good to be true, it probably is.”  Reportedly, Madoff claimed consistent annual returns of 10-12% with little volatility and no quarterly or annual losses.  I am not aware of any legitimate and reputable portfolio manager that can make that claim.  There simply is no investment available that doesn’t carry risk; certainly, any investment that pays those levels of return have inherently high risk.

Have you or anyone you know been a victim of Madoff? Please share your story and comments below.

Last week’s continued rally on Wall Street was welcome news for weary investors.  The 10%+ rise in the stock market was not sufficient to erase year-to-date losses, but any upside is welcome. The catalysts for the rally included positive reports from the financial institutions taking government help, talk about changing trading rules for short sellers, and the possibility of an accounting change in how assets are valued on company balance sheets.  Also, the markets were heavily compressed on the downside, so just like a spring, they had to give a little to the upside.

Unfortunately, the fundamentals of the economy still do not support a long term rally, so this secular bear market is not over.  What we’ve seen this past week is likely not the bottom and we are therefore approaching the markets very carefully.  There is more bad news to come from 1^st and 2^nd quarter poor earnings reports as the weak economy hits more and more companies.  From exporting companies to the big international firms, the global slowdown is hitting almost everyone.  Even hospitals are being challenged, and unemployment is sure to rise.  We’ve seen the effects of the sub-prime mortgage mess, and I don’t think we’re nearly done as more of the next tier of (higher quality) adjustable rate mortgages adjust upward.  Add to that the lagging commercial real estate markets which are no doubt feeling the effects of lower property prices and lower occupancy.

A lot of you have stayed in the market the whole time it has been falling and are wondering what to do.  If you have a ten-year time horizon, you can probably buy now and not worry.  But I wouldn’t make any big moves right now based on this short-term upturn.  If you are making regular contributions to your IRA or 401(k), you should continue to do so to help offset some of the past losses and buy companies at ½ off (or 2 for 1 depending on your favorite shopping term).  As I’ve said before, there is just no substitute for regular and big savings.  We could see this real bear market rally lure investors back in, just to crush their hopes soon thereafter.  As always, each person’s individual situation and goals are different, so you should talk with your own financial planner about what makes the most sense for you.

I believe that we have awhile to go in the current secular bear cycle. While we will see a “bottom” in stock prices at some point, maybe even this year, many believe that stocks are still overpriced relative to their future earnings potential.  No doubt, there is another bull market in our future  But I would rather be patient and rely on a cautious style of investing for now.  If I see opportunities to make short-term profits with some tactical moves for my clients, I will make them while limiting our downside risk.  But if I miss the first part of this run-up, so be it.  I see more risk than reward in this latest run-up.

And if you thought this posting was all bad news, then I’ll remind you that (my favorite season) spring officially arrives this Friday at 7:44 AM Eastern Time.  I know that most of you have had enough of the snow and cold and welcome the anticipated change in weather.  Me too.

Sam H. Fawaz CFP®, CPA  is president of YDream Financial Services, Inc., a registered investment advisor. All material presented herein is believed to be reliable, but we cannot attest to its accuracy. All material represents the opinions of Sam H. Fawaz.  Investment recommendations may change and readers are urged to check with their investment advisors before making any investment decisions. Opinions expressed in this writing may change without prior notice.  You can find out more information about YDream Financial Services at http://ydfs.com.

Some comments in this article were based on author John Mauldin’s recent and fine “Thoughts from the Frontline” newsletter. You can subcribe to it by clicking on the above link.

Two of the most hated words in the English dictionary are “diet” and “budget”.  Whether you call it a diet, counting calories or eating smart, you know deep down what that means.  When you think about it, the first three letters of diet spell “die”, so how could it be a good thing?

Similarly, whether you call it a budget, fiscal responsibility or a spending plan, deep down you know it means that you have to cut back on spending.  Fortunately, you don’t have to go hungry just because you are on a spending plan.  And just like weight loss, developing a spending plan can yield significant financial and non-financial benefits:

• Being in control of one’s finances reduces stress. Stress can make people eat more and spend more.
• Having a spending plan in place means you’ll have already prioritized the key activities, expenditures and projects you’ll need to make for the year and the money you’ll need to afford them.
• Spending less time worrying about money means you’ll have more time to think about the people in your life.
• Fewer money issues means lesser strains placed on your relationship with your significant other.

Here are some ideas you may want to incorporate into that process:

Don’t be afraid to ask for help: Do you know where you need to be? A financial planner can ask the right questions and develop a customized plan to help you figure out your starting point and where you’ll finish based on your age, earnings potential and the new habits you’ll develop.

Start tracking every dollar  you spend: Whether you do it with a pen and a notebook or a computer program (like Quicken or Microsoft Excel), make a concerted effort to track your everyday spending.  Physicians say that overweight people should track every morsel of food they eat; with money, it’s a similar thing.  Knowing where every dollar goes gives a quick picture where certain dollars can be saved or invested.  Some say that you should track each and every penny, but that’s not always necessary unless you want to.  What is mandatory is that you write it all down somewhere.  Doing it in your head doesn’t work.

Prioritize… When it comes to spending, there are needs and wants.  Try this exercise: You can do this on a big 2009 desk calendar (or an electronic calendar that allows space for lots of notes to yourself).  Mark down at the appropriate dates and times of the year items for which you need to spend and those for which you want to spend.

What are needs?  In part, food (not carryout or restaurant meals), the monthly mortgage, tuition, auto or rent payments; monthly utilities; home, auto, life or disability insurance; retirement savings; property taxes and credit card payments (for past purchases).

What are wants? Wants are non-essential items like vacations, non-essential home improvement projects, restaurant meals (you can cook at home, cant you?) or treats like clothing splurges, jewelry or electronics.  Compare these total expenditures to your total income.  What will this crowded calendar tell you?  That by attacking debt, making certain sacrifices and spending and saving smarter, you can eventually “un-crowd” that calendar and take control of your financial life.

…then zero in each month: There has to be a living, breathing side to budgeting that accommodates change.  Do this: Near the end of each month, make a list of the specific “needs” and “wants” you’ll face next month and figure out how much money you’ll have for wants after needs are addressed.  For example, if your car needs a necessary repair, that’s certainly going to boost the “needs” side of the page.  If you find, due to a one-time event (paying off a particular credit card, for example), that you have more to spend in the “wants” column, then it’s time to decide whether it’s time for a treat or to throw more into savings, investments or attacking any other debt.  Every treat that you put off gives you much satisfaction of getting closer to your financial goals, but, just like a diet, you don’t want to deprive yourself and get so frustrated that you go on a spending binge.

Identify and plan for long-term goals: You must think about the things that you really want to do with your life and what those things will cost.  Putting goals in writing gives them a formality and a starting point for the planning you must do.  If these goals require saving, make sure that you put those savings dates on the financial calendar you made.

Build failure and recovery into the plan: How many diets have evaporated with the words, “I blew it?”  The fact is, with food or money, everyone goes off course at times.  The important thing is to have a plan for corrective action.  If you’re about to make an impulse purchase, implement a three-day spending rule.  That means you should give yourself three days to check your budget and think through the purchase before you make it.  If you can minimize the damage and get back on course, your progress will continue.

My experience with those who adopt a spending plan is that they feel a certain sense of freedom that mirrors the feeling of fitting into a pair of jeans that haven’t fit in years.  Anytime you take control of important life decisions makes you feel empowered and ready to tackle new challenges.  Good luck with it!

Note: This post is based in part on an article produced by the Financial Planning Association of which I am a member.

Are you thinking about loaning to or borrowing money from a friend or family member?  Perhaps you’re considering co-signing a loan for someone.  Maybe you should reconsider and make a gift instead.

While sometimes you don’t have much of a choice, loaning to or borrowing money from family or friends is fraught with problems.  The transaction immediately changes the dynamic of the relationship because you are no longer just friends or family members; you are now entwined in a business transaction.  This is a business transaction that probably doesn’t observe many, if any, of the formalities of business loans, lest those formalities taint the relationship.  You’ll make excuses like “She’s my friend” or “He’s family, we don’t need formal documents, I trust him.”  Oh but you do.  You really do.

Sure, while payments are being made on a timely basis and everyone is playing by the rules, everything’s just cool.  But once a payment is late, or not made at all, both parties begin to feel uncomfortable in each other’s presence.  Should you say something, ask about the money, or should you just wait a few more days?  Sure, he was just too busy, and probably forgot.  The lender starts making excuses for the borrower so she doesn’t have to confront him.  Then the borrower loses his job, has a catastrophic loss, or otherwise falls ill.  Days turn into weeks, and weeks into months, and maybe into years, but no payment surfaces.  The lender musters up the courage to mention something about it at one point, and the borrower offers excuses for not paying, and promises to pay soon.  You both feel bad about having to discuss it.  The promised day comes and goes without a word or a payment.  The borrower starts to avoid the lender.  Resentment starts to fester.  A confrontation eventually ensues; it’s not good.  The relationship is forever tainted, both parties are resentful.  The borrower is resentful because he can’t believe that the lender doesn’t trust him long enough to pay her back.  The lender is resentful because she trusted him to keep his word, pay on time, and avoid any confrontations.

The above scenario plays out quite a bit, I’m sure.  People want to believe that their friends and loved ones don’t need written documents to pay back money they owe.  They want to believe that life isn’t messy, that the borrower will be healthy and fully able to pay them back with no hassles and no delays.  But that’s not realistic.  Lives change, people change, they move, they lose jobs, they change relationships, and, when they get into trouble, justify why they should not have to pay the money back.  “He doesn’t need it”, “I did her so many favors”, “I’ve fallen on hard times, so I’m sure that she understands” are a sampling of the justifications people use.  In many cases, they don’t take the time to talk to the lender to try and work it out.  Instead, they avoid the subject, hide, and hope the problem will just go away.

In most cases, it simply makes more sense to just give a gift to the friend or family member and not expect repayment.  Whether we’re talking about $20 or $20,000, you really have to ask yourself what would happen if you loaned the person the money and they did not pay it back.  Depending on the amount, you can probably count on the fact the the relationship is forever tainted, if not over.  So when that friend or family member asks to “borrow” some money, depending on your financial ability and the amount requested, you might just want to give it to them and tell them that you don’t expect repayment.  If they do repay it, then great.  If they don’t, then you weren’t expecting repayment so the above scenario does not play out.  For smaller amounts, this just makes sense.

If you’re the borrower, then also think twice about asking a friend or family member for money.  If a bank or other 3rd party lender won’t loan you the money, there’s a good reason for it: they probably believe that you’re just not going to be able to pay it back, and therefore you’re not worth the risk.  Going to a friend or family member for the money just puts them on the spot, and sends the message that although you weren’t a good enough credit risk for a legitimate lender, that they should trust you to pay them back.  That’s not fair to your friend or family member.

Similarly, if someone, or anyone, asks you to co-sign a loan, don’t do it. Ever.  Odds are very high that you will end up paying off the debt.  Again, the bank is saying that the borrower’s credit is not good enough to get the loan, and therefore they don’t believe that the borrower would be able to pay it back.  So having a qualified borrower co-sign it just means that the co-signer is equally liable for the loan, and the lender can go after her for the full amount when the primary borrower does not pay.  Sometimes the co-signer doesn’t find out that the borrower has defaulted, especially if it’s a long term loan and the co-signer has moved or changed phone numbers and cannot reach the co-signer.  By then, the co-signer’s credit record is tarnished and collection agents are searching for her.

If you must loan friends or family a rather large sum of money, then you have to protect your family and yourself.  Once you are married or have kids, you have a primary responsibility to look out for their best interests and ensure that they can recover the money if something should happen to you.  If the borrower balks at using paperwork, then you already have your answer and have just saved yourself a bit of money and headaches down the road.  So here’s what you need to know to do it right:

1. Make sure that you draw up the proper loan paperwork.  Get legal help to draft the documents, especially if collateral or real estate is involved.  Any office supply store can provide a simple loan form, or search for one on the web.  For a small fee, go to Virgin Money to set up the whole thing.
2. Charge a reasonable rate of interest.  This is an IRS requirement for loans between related parties, or they will impute additional taxable interest income to the lender, and the borrower will likely end up with more non-deductible interest expense.  Go to the IRS web site for more information about applicable federal rates and loans between related parties.
3. Spell out as many of the terms of payment (time, place, form) and remedies for default in the loan documents.
4. Follow up and communicate on non-payment early and often.  It’s better to stay on top of it and let the borrower know that you still expect payment.  Seek legal advice about collection rights and responsibilities if necessary.

When it comes to loaning and borrowing money between friends or family, learn to just say no if you value the relationship.  Perhaps you can help the would-be borrower by pointing them to other peer-to-peer lending sources such as Virgin Money, Prosper, or Zopa. (1)   If you end up with a deadbeat borrower, then you’ve probably lost a friend or close relationship in addition to your money.  Alas, this is the price of mixing friends and money.

(1) I have not performed any due diligence on the the listed peer-to-peer lending sites and cannot vouch for their services.  TheMoneyGeek does not endorse them nor receives any compensation for mentioning them.

St. Petersburg Florida – The last day of the NAPFA 2009 Investments Conference finally brought warmer temperatures to go along with the beautiful Florida sunshine we’ve been seeing; of course, it showed up just in time to for us to head home.  The day kicked off with a presentation by Moshe A. Milevsky, Ph.D, Associate Professor of Finance at York University entitled “Are You a Stock or a Bond?” The quirky title notwithstanding (it’s his book title), this presentation proved to be today’s highlight and perhaps the highlight of the conference.

Moshe has a dynamic presentation style that makes you want to sit up and pay attention.  As he flashed numerous press clippings of more employers dropping defined benefit plans (estimated to be one large company freezing its benefits every 10-14 days), he explained how we are all becoming responsible for creating our own personal pension plan.  With longevity risk increasing every day (over 2 million people in the U.S. are over 90 years old), companies are turning corporate liabilities into personal liabilities under the guise of increasing shareholder value.

Moshe went on to explain that, for most of our lives, the most important asset on our personal balance sheet is often never listed or estimated–that is, our human capital or earning capacity.  When we are young, our human capital far exceeds our financial capital.  As we age, our financial capital begins to exceed our human capital until we retire and rely exclusively on our financial capital.  In asking “are you a stock or a bond”, Moshe encourages us to try to estimate the value of our remaining human capital and attempt to classify it as a stock or a bond, and factor it into our asset allocation.  Depending on the nature of your work, you may classify yourself as a bond (e.g., a tenured professor) or as a stock (e.g., an investment banker in this economic environment).  He goes on to explain that we often ignore this asset in our portfolios to our detriment, even though we may classify defined benefit pensions as fixed income instruments.   In addition, workers often over-invest in sectors or industries they know well (e.g., investment bankers investing in financial stocks), when they should really diversify to sectors they don’t know much about (e.g., technology.)

Next up were Paula Hogan CFP®, CFA and Scott Witt, FSA, MAAA to co-present “Income Protection – Immediate Fixed Annuities vs. Variable Annuities with Living Benefits”.  The two had worked up an extensive comparative case study using a 60 year-old male investing in a 15-year period certain immediate annuity (with inflation protection) versus a variable annuity with guaranteed living benefits of 5%.  The retiree invested 20% of his portfolio in the annuity.  As you might expect, the conclusion was that the benefits of the 15-year period certain annuity were greater than the variable annuity even though the variable annuity had the potential to generate far greater income for the retiree.  Paula explained that “most people care about maintaining their standard of living more than the wealth that they accumulate.”

Scott MacKillop of Frontier Asset Management got the next to last presentation slot and discussed “Outsourcing Investment Management”.  As you can imagine, he discussed the many advantages of outsourcing and the CEG Worldwide studies which concluded that advisors who use turn-key asset management programs (TAMPs) generally have more revenue, better margins and better results.  Scott cautioned advisors to look to see who funds these types of studies and make sure that they’re not funded by companies that have a vested interest in promoting investment management outsourcing.  He also observed that many TAMPs are pretty much available for sale even before they start business, citing the example of Genworth Financial purchasing two large outsourcers recently.  So obviously you want to ensure that the provider you may be considering is not just setting up shop to sell itself in short order.

The conference ended on a high note with a panel discussion entitled “Comparing Investment Management Procedures” including Cheryl Holland of the Abacus Planning Group, Janet Briaud of Briaud Financial Advisors, Frank Moore of Vintage financial services, LLC and moderator Palmer Jones of Palmer Jones & Associates, Inc.  Palmer peppered the panel with various questions about how they run their investment management practices including the type of research resources they used, the software employed, their investment philosophy, and their asset allocation approach amongst others.  I was surprised to hear that Janet had pared down all her clients’ allocation to equities to around 25% in 1999 in anticipation of a long bear market.   I was equally surprised that she had done that with all of her clients, young and old.  Her thinking was that a downturn was coming and of course, it did happen, and she admitted that perhaps she was a bit early.  At this point, Janet has sold off all Treasuries given that she believes that the downside is far greater than the upside.

Some of the reading resources the panel used in their practices included The Economist Magazine, Financial Times Newspaper, John Mauldin’s Frontline Thoughts, Woody Brock’s Economy Newsletter and Dan Ferris’ Extreme Value Newsletter.  All of the panelists indicated that they read for about two to four hours per day to keep up with changes in the industry. “What may be more important is what you don’t read” added Janet.  Most of the panelists acknowledged using Morningstar Principia or Workstation for fund research.  Palmer indicated that he used the Investors FastTrack system, but did not elaborate.

The interesting question came at the end when Palmer asked the panelists about their worst and best decisions made in their firms.  Cheryl said that the worst decision she probably made was to add certain asset classes too early, or perhaps before she had performed adequate due diligence on them.  Her best decision was to hire a Chief Investment Officer and purchasing iRebal.  Frank said that his worst decision was probably to not pay enough attention to the cash situation, that is, letting his clients manage their own cash needs in certain ways.  Janet indicated that purchasing a closed-end tax-free bond fund at the wrong time was probably her worst decisions.  All agreed that they everyone in this business makes mistakes; the key is to make more good decisions than bad ones.

I would rate the Conference as a great success and want to thank the Committee and the NAPFA staff for putting so much time and effort into putting it on.  While I had hoped for a bit more nuts and bolts “how-to” sessions, I was pleased with the conference.  I hope that they decide to put it on again next year, and maybe, just maybe, it will be a bit warmer.

St. Petersburg Florida – Day two of the NAPFA Investments Conference brought a parade of presenters, some better than others.  Here are highlights from the sessions that I attended:

The first session I attended, “Sharing Investment Research Resources” was put on by conference chair Carolyn McClanahan and member Nancy Bryant.  It seems that they, along with three other NAPFA members, have been sharing mutual fund research responsibilities and picks.  Each member has a particular sector of mutual funds to research and report on via a monthly one-hour conference call.  One member maintains the list of preferred funds and they all weigh in on the choices.  No one member is bound to use all the funds, and anyone can keep any fund that is dropped from the list.  The benefits in time and effort saved is obvious.  The purpose of the presentation was to encourage the formation of more groups of five around the country.  Watch for further details to come from NAPFA in the near future.  A conference call is planned along with the maintenance of a list of interested members.

Next I enjoyed a lively presentation by Doug Poutasse of the National Council of Real Estate Investment Fiduciaries entitled “Direct vs. Indirect Investments in Real Estate”.  Doug mostly discussed commercial real estate and the many ways to invest in them: directly, via REIT’s, via open-end funds, and via closed-end funds.  Closed-end funds, as you might imagine, are the least liquid of all types of real estate investments and keep your money invested for as long as they need it–there is no set timetable for return of your funds.  Open-end funds allow you to get your money at certain intervals, though they are less liquid than direct investments in real estate.  That was a surprise to me since I would have thought that direct investments were the least liquid of all.  But liquidity does not necessarily equate to profitability–you can get out anytime, but at what price?

After a break, Rudy Aguilera of Helios LLC presented a fast paced “Insulating Your Clients from Volatility.”  Rudy discussed how using options can protect the downside risk of many portfolios at a very low cost.  With several examples, he showed how porting just a fraction of the investment can improve the return while reducing the volatility of the overall investment.  I can’t profess to have understood everything he explained, but several of the examples made sense.  He also showed an example of how he could legally convert a long term capital loss into a short term capital loss using the wash sale rules to your advantage.

Our (rubber chicken) lunch presentation by Michael Sharmer of Skeptic Magazine did not disappoint and was the highlight of the day.  Michael gave a lively presentation about human behavior and how we tend to follow the crowd and how easily our brains can be primed to give the desired results.  He demonstrated his points with numerous multi-media examples showing, for instance, how our extreme focus on one thing can lead us to literally miss the gorilla in the room.  In one example, we were asked to count the number of rebounds made by a pair in a video wearing white shirts.  While that occurred, a man in a gorilla suit appeared and danced across the screen for several seconds, but most of us didn’t even realize it because we were focused on counting rebounds.  At a minimum, it makes a convincing case why texting while driving is a bad idea.

“Building Your Own Alternatives Fund” was a panel discussion presented by Giles Almond of Matrix Wealth Advisors, Sheila Chesney of Chesney & Company, Brian Farmer of Hirschler Fleischer, and  Jonathan Self of Compliance LLC.  The panel discussed the advantages of and the due diligence that goes into building your own pool of (say private equity) funds ultimately managed by a registered investment advisor.  Since most clients don’t qualify for private placement of equities due to high minimums, this can be a way for firms to offer these alternatives to your clients.  The work involved was by no means short or easy.

Continuing the alternative investments theme, Sheila Chesney continued with her presentation entitled “A Roadmap for Investing in Alternative Assets” and described how her firm went about developing their own alternative investment fund.  “The affluent are not looking for just another mutual fund shop” Sheila explained.  The key here is to perform extensive due diligence, diversify amongst alternate investments, and educate clients about the risks involved.  “And just because it’s new and different doesn’t mean that it’s necessarily riskier.”  Sheila stressed that setting up one is in no way a turn-key solution.

The day wrapped up with a nice reception at the St. Petersburg Museum for Fine Arts.

Please come back tomorrow for highlights of the third and final day of the conference.  For live updates, please follow my Twitter feed.