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Investment advisers through the decades

Tuesday, February 10th, 2015

I have been in the investment arena since 1983. I have seen many fads come and go -- some hot, some not so hot.

What I don't like to see is investors lose money to salespeople selling the next hot investment. Many of these investors eventually find their way to my doorstep, unfortunately with less money.

Investing is not about the next hot item; it is about understanding the fundamentals of a company and making prudent decisions to invest.

Investors need to be warned that while the wrapper looks different, the inside is the same. Let me explain.

Back in the 1980s, being a broker was common. Brokers sold a mixture of products that included stocks and bonds, and they were big on limited partnerships.

If you held one of these partnerships or dealt with many of the brokers, you know your return was not that good and you may have lost some, if not most, of your principal.

Investors then realized it was not good to invest with a broker.

Then financial planners came in vogue during the 1990s and early in the new millennium. A certified financial planner, known as a CFP, would give investors comfort because they were not salespeople but someone trying to create a financial plan with best interests at heart.

What I discovered with many "financial planners" is that, yes, they would put together a financial plan for you, but they would use it as a tool to sell you the next hot mutual fund or annuity so they would make a large commission.

It is now 2015 and I cannot remember the last time I heard anyone call himself or herself a financial planner. The reason is that, once again, after being burned by many financial planners, investors have realized that the financial plan is just a tool to be sold investment products and a financial planner is just a good salesperson with a title.

The new buzzword that came out about a year ago is "wealth manager." It is a pretty catchy phrase because only the wealthy can deal with these wealth managers, right? Now investors can feel good about telling their friends they have a wealth manager.

I have never gotten into the names such as financial planner or wealth manager. I set up a firm with the Securities and Exchange Commission as a registered investment adviser.

My job is to do the research to find high-quality investments based on fundamentals: Buy the investments at great-value prices and sell them when they become overvalued. No emotions, just results, as we say in my office.

Also, everything I do is on a fee basis and I never get paid a sales commission. If my client’s portfolio goes up in value, we both make more money. If it goes down in value, we both make less money. This has always made sense to me.

But back to wealth managers. These are the same brokers from the 1980s and ’90s, and the financial planners from 10 to 12 years ago. They sell you the same products but under different names, such as alternative investments, which are pretty much the same as limited partnerships.

They also like to sell annuities and variable annuities that pay high commissions, sometimes as high as 8 percent to 12 percent of the value of the annuity.

These wealth managers will spend time with you and talk a lot about diversification and how you should be in different products. They will never mention how much more they will make by selling you these higher-commission products.

They will also tell you that stocks are risky and you should move your money to these alternative products.

Keep in mind they can't make much commission on stocks compared with the other products they will sell you. And unless they spend time reading the financial statements and the fundamentals of the stocks, they have no clue how to invest your money. So it is easier for them to bash what they don't know and sell you a product that will make them a wealth manager.

Keep in mind the wealth will be in their net worth, not yours.

Don't be shy. If you have a wealth manager, ask about the commissions from each product you buy. Be prepared for some to skirt the issue and talk about diversification, and how you shouldn't be worried about what you're paying because it's about the safety of your principal. What a joke.

Do you have a question or a company you'd like me to take a look at? Email me at!

Wilsey is president of Wilsey Asset Management and can be heard at 8 a.m. every Saturday on KFMB AM760. Information is provided by Reuters.

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