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Clear Thoughts
It is not just the public companies!
Originally Published Friday, April 8, 2005
| Who can you, the investor, trust? The financial services industry is plagued by scandals and biased information. Those within the industry have incentives that are not aligned with the interests of their clients. Clear, however, has a system that allows for independent thinking and ensures that our decisions are always made in the best interest of our investors. |
Scandals are still on the front pages of the media as well as wreaking havoc through the markets and individual securities. As much as the government and financial services industry have tried to quiet things down, the press and Elliot Spitzer have been difficult to slow down. This week we will talk about the financial services firms, next week, we will cover what is the larger issue from our perspective; public companies.
Brokerages often have compensation schemes that may conflict with the best interests of their clients. Stock brokers are usually paid commission fees based on trades, so their inherent incentive may be to make multiple trades on their clients' accounts, or what is called "churning" the accounts. We feel this fails to keep broker and client interests aligned. Also, remember where the brokers get their stock picks? Usually, their picks originate from their internal research and sales departments. Investment banks get paid huge fees to help corporations with their financing. When an analyst at an investment bank then writes a research report about a client company, is it unbiased? These same bankers and analysts assist in crafting management presentations given to other analysts and portfolio mangers. In turn, the research reports and presentations wind up on the desks of mutual fund managers, who use them to help make investment decisions about those stocks.
Wall Street "whisper numbers," potentially biased research reports, hidden mutual fund fees, funds that drift far from their stated styles, chasing performance with derivatives. These are the issues confronting investors.
Fact; Wall Street and mutual fund scandals have cost investors billions of dollars. Some of America's biggest investment banks, brokerages and mutual funds have admitted to working collaboratively performing illegal trading, among other dubious practices. There have been some reforms, but investors are still left wondering: who can they trust?
Take a look at these links if you haven't recently.
A Google search on the research settlement
A Google search on the mutual fund scandals
It comes down to the core of the way "the system" is designed; we do not believe it encourages independent thinking and therefore sound investment decisions.
Clear Asset Management is free from the problems plaguing Wall Street. We operate with complete independence. We make investment decisions using our proprietary software that evaluates and ranks stocks based on vast fundamental data. Our rankings determine which, when and how much of the stocks in our portfolio, when to trim or add shares, and perhaps most importantly, when to sell. We do not utilize Wall Street research, whisper numbers or attend management presentations.
Keeping our business aligned with what is best for our investors and subscribers is a key factor to the long-term success of Clear Asset Management. We believe that is why our new customers coming from customer word of mouth is already a driver of our growth.
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