Independence Versus the Big Firms

I have several friends that are brokers with large firms. Although we are all investment advisors, my friends work very differently. While they are with large firms, I’m a registered investment advisor (RIA) with my own firm. From my perspective, clients are far better off with independent RIAs like myself.

There is a commercial from a major brokerage outfit that says, “Our clients always come first.” Unfortunately that isn’t the case. Large public companies are responsible to their shareholders. As a result, decisions are made to maximize profits to keep shareholders happy. Revenue generation is the top priority so there can be a conflict of interest between placing client money in the best area versus placing client money into areas that generate the most income for the broker and the firm.

For independent fee-only RIAs, there is no conflict between serving the shareholders or the client. There isn’t the lure of receiving extra compensation when placing client funds in certain investment vehicles. We receive no commission from trading and there are no production quotas. We are only paid based on the value of client portfolios. It is in our interest to do what is best for the client.

Remembering David Martin

A subscriber to my weekly VIS Alert.com newsletter, David Martin, unfortunately passed away last week from a freak shark attack.

http://today.msnbc.msn.com/id/24325640/

I met David Martin at AIQ’s fall seminars. He was a fan of my ETF rotation approach and used it in his own portfolio. At his last seminar we agreed that the following year we would go mountain biking after the seminar. Unfortunately that ride never happened. He seemed 20 years younger than his real age, always saw the glass as half full, and will be missed. Our prayers are for his family during this difficult time.

AAPTA Seminar

A week ago I spoke at the American Association of Professional Technical Analysts (AAPTA) seminar in San Francisco. While my wife and children enjoyed the sights and sounds of the city, I was able to visit with some of the top technicians in the country.

The AAPTA organization was founded in 2004 and has around 130 members. This organization allows professional technicians to engage in networking and thought provoking dialog.

My session covered the strategies found in my ETF Trading Strategies Revealed book. Since Paul Desmond of Lowry’s Research was the next speaker, I was honored to be the warm up act! It is a bit intimidating speaking to this group but I quickly settled in when I humorously described what you hear on financial TV and what it really means. It goes like this:

"We have great values in our portfolio." translation - Our stocks have been massacred.

"The market sold off on technical factors." translation - We have no idea why the market went down.

"We are short term cautious but long term optimistic." translation - We want to be right no matter what happens.

Although the S&P 500 is near an important 1400 resistance area, I can unfortunately report that Linda Raschke and Paul Desmond remain bearish (both turned bearish at much higher levels). Stan Erlich was more constructive, however, pointing to a developing head-and-shoulders bottom pattern.

I had the pleasure of meeting Tom and Sherman McClellan. Surprisingly Tom knew me from my past appearances on a Los Angeles financial TV show. Tom is extremely knowledgeable on the financial markets. Another highlight was talking to Nelson Freeburg, author of Formula Research. I’ve always admired his detailed quantitative testing.

This was a good time and I look forward to next year’s event.