Choosing a Financial Adviser: A guide to making an informed decision.

Recently Goldman Sachs executive Greg Smith resigned from the company and openly criticized the firm and some of its business practices in his resignation letter.  The majority of his criticism centered around his former company's pursuit of profit which frequently came at the expense of the firm's clients.  A recent article written by Dan Kadlec for Time gave some great guidelines on "How to Vet Your Financial Advisor".   He gave a three step process outlined below:

*Gather a short list of names:  Dan Kadlec suggested starting with references from those you trust.  Asking friends and family members who handles their money and hearing first hand their experience should give you a good start.  

*Interview each planner:  Your financial advisor should be focused on you as the clients and your needs instead of your money.  Another key to find out during the interview is how the advisor gets paid.  Are they receiving a fee on the money that they are managing, are they commissioned based on products sold, or is a combination of the two?  Dan stated that fee-only planners are generally a good choice.  

*Investigate top choices:  Potential clients can research investment adivisory firms through the Securities and Exchange Commission (SEC) Adviser Public Disclosure website.  Investment advisers Form ADV gives important information regarding the firm.  It lists the amount of money the firm manages/ how many clients it has, and lawsuits & arbitration against the firm among other things.    

Read the full article here.  

Read Greg Smith's resignation letter.  

"Advisors" Vs. "Brokers". What's the difference?

Many people don't understand that there is a difference between an "Advisor" and a "Broker".  As a Registered Investment Advisor (RIA), our firm is a fiduciary.  Which begs the question of what exactly a fiduciary is?  A fiduciary has the duty to act in the best interests of their clients at all times.  Brokerage firms generally are not fiduciaries to their customers, and therefore do not make decisions that are solely in their customers' best interests.  Additionally, as a fiduciary the advisor must disclose to the client any potential conflicts of interest that may exist.  Advisors are required to provide their clients with a form ADV, which details exactly how the investment advisor does business.  Lastly, as a fiduciary, advisors do not engage in other business activities such as investment banking or underwriting which brokerage firms do.  In short, we are held to a high legal standard for the services we provide to our clients.  Below is a short video that illustrates the difference between an broker and fiduciary. 

Is your advisor looking out for you?

One of, if not the main thing, that sets our firm apart from investment brokers is the level of accountability our firm has as a "fiduciary".  As a fiduciary we are required by law to look out for what is best for our clients.  A recent Goldman Sachs executive's resignation letter gives us an inside look at investment banks and their pursuit of profits.  This portion of the article on the resignation letter jumps out.   

"When evaluating people who are managing their money, investors need to be mindful of whether the managers are true fiduciaries, or commissioned to serve in the best interest of their clients, Hebner says. You need to understand the relationship you have with your money manager and insure your well-being is their responsibility. If not, you might want to look elsewhere, he says. 'Brokerage firms have clauses that exempt them from being a fiduciary. It's just incredible,' he says"

Are the people who are giving you investment advise or managing your money putting your interests ahead of their own? As a fiduciary, we are required to always put your interest ahead of our own. Read the full article

The Hidden Value of WPX Energy

On January 3rd, 2012 we posted an interview with the newly formed WPX CEO Ralph Hill on our blog.  A few days ago one of our Portfolio Managers came across an article in Barrons that made a case for the hidden value of WPX Energy.  The article pointed out that there are some interesting valuation anomalies that point to WPX share price being cheap.  Read the full article here. 

Apple now worth over $500 billion, more than the GDP of Poland.

We have been touting the potential of Apple here at ARS Wealth Advisors recently.  Despite it reaching new highs almost daily, we still feel that it is undervalued as a company.  Attached is a recent article that ran at CNN Money which looks at Apple's $500 billion worth, and points out that it is greater than the GDP of Poland, Taiwan, or Saudi Arabia to name a few countries referenced in the article.  The article also points out three reasons why we still have strong conviction in Apple.

1) Apple is still one of the fastest growing technology companies who sales were up over 70% last year (Q4 sales of $46.3 bil up 73% from Q4 of 2010).  

2) The companies stock price hasn't kept up with its fast earnings growth and is still being called "cheap".  

3) The company trades at a lower earnings multiple than less proven companies with less predictable futures (Apple is 11.6, Netflix 42.2, LinkedIn 127.9). *based on S&P consensus estimated earnings for next fiscal year.

Read article here.