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More About This Title Wall Street Potholes: Insights from Top Money Managers on Avoiding Dangerous Products
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Wall Street Potholes shares insights into the money management industry, revealing the shady practices that benefit the salesman far more than the client. Bestselling author Simon Lack brings together a team of experienced money managers to give you straight-from-the-source intel, and teach you how to recognize bad advice and when it's better to just walk away. Investors are rightly suspicious that many products are sold more because of the fees they generate than their appropriateness to the client's situation, and that's only the beginning. This book lays it all bare so you can walk into your next deal with your eyes wide open. You'll learn just how big the profit margin is on different products, and why Wall Street intentionally makes things as complicated as possible. You'll learn expert tactics for combatting these practices, so you can avoid buying overpriced products and confidently discriminate against advisors who put their own interests first.
For all the volumes of investment advice on the market, dissatisfaction with the financial services industry has never been higher. This book describes the reason for that disconnect, and tells you how to see through the smoke and mirrors to make the best decisions for your money.
- Discover the profit margin built into some popular products
- Learn the reason behind bundling and why Wall Street fears comparison shopping
- Consider the importance of benchmarking, and why so many firms avoid it
- Become better informed so you can easily recognize poor investment advice
If asking questions of your financial advisor only nets more confusion, if you want to have more control over your money, you need a firm grasp of how these firms manipulate your trust. Wall Street Potholes tells you what you need to know to become a smarter investor.
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SIMON LACK, CFA, is the founder of SL Advisors, LLC. Previously, he spent 23 years with JPMorgan. Much of Simon Lack's career with JPMorgan was in North American Fixed Income Derivatives and Forward FX Trading, a business that he ran successfully through several bank mergers, ultimately overseeing 50 professionals and $300 million in annual revenues. He is the author of the bestselling book The Hedge Fund Mirage:The Illusion of Big Money and Why It's Too Good to Be True.
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Preface xi
Acknowledgments xiii
CHAPTER 1 Non-traded REITs: A Security That Shouldn’t Exist 1
Poor Advice 1
Why Not Get a Listing? 5
Disingenuous Advice 9
Whose Side Is Your Financial Advisor On? 12
Where Are the Regulators? 15
Overall Returns Are Poor 17
The Importance of Benchmarking 19
Puts and Calls 20
Financial Advisors Need to Do Better 21
CHAPTER 2 Why Investors Pay Too Much for Yield 25
The Mysteries of Closed-End Funds 25
Investors Can Overpay to Simplify Their Taxes 29
The HFT Tax 32
When Managers Run a Company for Themselves 34
The Ham Sandwich Test 37
If the Prospectus Says You’ll Be Ripped Off,
It Must Be Legal 38
Timing Is Everything 41
CHAPTER 3 Why Structured Notes Are Rarely the Best Choice 47
Kevin Brolley
Caveat Emptor! 47
Structured Note Basics 49
Why Buy Structured Notes? 52
The Heart of the Matter: The Arguments Against 55
CHAPTER 4 Update to The Hedge Fund Mirage 69
Hedge Funds Remain a Great Business 69
Industry Reaction to the Dismal Truth 72
Why Hedge Funds Are Still Growing 74
Some Accounting Rules Are Dumb 77
Politics Drives Asset Flows 80
Too Much Capital 82
For Once, the Retail Investor Wasn’t Duped 86
CHAPTER 5 Why Is Wall Street So Inefficient? 91
Why Is Finance So Expensive? 91
Trading Doesn’t Build a Secure Retirement 94
Invest Time before Money 97
Sex and Investing 98
Complexity Sells 103
The Hidden Costs of Municipal Bonds 106
Some Bankers Just Don’t Think 109
CHAPTER 6 The Un-Portfolio and Better Portfolio Management Techniques 115
Bob Centrella, CFA
Background 118
Un-Portfolios and Diversification 120
Fees and the Black-Box Models 123
Other Examples of Un-Portfolios 125
Exchange-Traded Funds 127
Mutual Funds and Fees 128
Load Funds 130
Fiduciary Duty 131
Portfolio Management Basics 133
Summary and Conclusion 137
Bonus Section 138
CHAPTER 7 Annuities 145
Dave Pasi
Introduction 145
What Is an Annuity? 147
What Are the Different Types of Annuities? 148
Variable Annuities 151
Associated Risks 152
Other Risks Are Lack of Flexibility 153
Variable Annuity Riders 154
Illiquidity, or the Lack of Being Able to Get to Your Money 157
Evaluation of Returns: Investment Options inside of Variable Annuities 158
Fee and Charges 159
Options If You Already Own an Annuity 162
When Should You Consider Using an Annuity? 163
Recent Developments with Annuities 164
Savings Bonds: Little-Known Good Deal 166
CHAPTER 8 Is the Most Important Professional in Your Life Even a Professional? 171
John Burke
My Start as a Broker 172
Pressure to Generate Business 174
Why You Don’t Invest with Borrowed Money 176
Has the Industry Made Any Progress? 178
Is Financial Advisory a Profession? 181
Why You Want a Fiduciary 183
More Things to Consider When You Choose Your Advisor 189
A Better Way to Measure Results 191
CHAPTER 9 Putting Investors First 197
The Future of Finance 197
Understand Who Your Advisor Works For 200
Really Understand the Fees 204
Try Asking These Questions 207
What Else Can Be Done? 210
The Role of CFA Institute 212
Bigger Isn’t Always Better 215
About the Contributors 219
About the Author 223
Bibliography 225
Index 229
