This month we attended a conference for our friends at the Oregon Trial Lawyers Association in Sunriver, OR. We manage investments for the association and provide 401ks to many of the firms. To keep things interesting at our booth, we made a cardboard cutout of Bernie Madoff and contrasted our values with his lack of values.
Here’s what we thought was most helpful to understand:
Secret Strategy – Bernie had a strategy that he wouldn’t allow anyone to know about. His famous phrase when asked was, “Trust me, I know what I’m doing.” Secret strategies don’t exist. Before you put your hard-earned money with someone to invest, you need to be able to understand how they’re investing it.
Knowable Strategy – Our strategy is no mystery. We either look for companies with growing dividends in our income portfolios, or search for undervalued up-and-comers in our growth account. It’s a strategy we follow from Morningstar and both have done well.
Creative Compensation – You could say Bernie had a real creative way of charging fees. He didn’t let those fee agreements keep him from helping himself to 100% of the accounts.
Clear Fees – We believe fees should be simple enough to be understood. Our fees are just above 1% per year of the account value on average.
Advisor First – I think it’s clear Bernie didn’t have his clients’ best interest in mind. He had his OWN interests in mind.
Client First – We are fiduciaries and are legally (and morally) obligated to act in our clients’ best interest instead of our own. This means we can’t sell a lower quality investment to a client because it pays us more.
Mythical Results – Bernie’s results were too good to be true, but no one could see that because he controlled the statements and there was no third party to verify his claims.
Realistic Results – We work with a third-party custodian, TD Ameritrade, so clients have the peace of mind of knowing their statement values are not made up and have been verified.
We recognize Bernie Madoff and his $65 Billion ponzi scheme is old news. However, we still see many advisors who use some of Bernie’s old tricks: hidden fees, overly complicated strategies, advisors focused on themselves, and the promise of returns that are unreasonable.
These people are a disappointment to our industry and we work hard to educate our clients and the public so they aren’t taken advantage of. If you think your friends or your family are in this situation and need a second opinion on an investment, please don’t hesitate to contact us. We’re happy to share our thoughts.
Thank you for reading,
Tim Porter, CFP®