Financial Advisers: Show Us Your Numbers was an article written by Jason Zweig a couple of months ago that I think did not get much press, its mind boggling actually especially now when everyone with a blog is consider a pro and guru. Here are some tidbits from the article
“I have to think investors would want to know that, but I don’t know how many are actually asking for it,” says Charles Rotblut of the American Association of Individual Investors in Chicago, a nonprofit with 170,000 members nationwide.
“It’s baffling to me,” says Tim Medley, president of Medley & Brown, a financial adviser in Jackson, Miss., that manages $575 million and publicly updates its performance monthly online. “The advisory business has grown dramatically, and I would have guessed that by now a lot more advisers would be posting their rates of return on their websites.”
Even so, most financial advisers remain reluctant to calculate their results. Jonathan Pond, president of Jonathan D. Pond LLC, a financial-advisory firm in Newton, Mass., that manages approximately $230 million, says he worries that the Securities and Exchange Commission would second-guess any such numbers, raising the potential for regulatory reprimand.
“As a result, we absolutely do nothing as far as putting out performance data,” he says. “It will be a cold day in Hades before we put that sort of thing in a brochure.”
Most investors probably won’t even go that far, says David Spaulding, head of the Spaulding Group, a firm in Somerset, N.J., that measures investment performance. “In a relationship business, many clients just say, ‘Why would I ask about numbers? This guy clearly knows what he’s doing.’ So nobody brings it up.”
Another reason advisers don’t make these disclosures may be that they don’t know—or even want to know—their returns.
“If an adviser says that every client is different, then how can he realistically be an expert on investing in all those different ways?” Mr. Fried asks. “And if they aren’t all different, then the adviser must have a few core strategies, and then the return for each of those can be reported.”
The way I see it, they are some real grey lines with showing performance which the rules themselves don’t make it clear for those who want to do it. I see some RIA’S that do it with a million disclosures, I have seen funds that say their numbers are hypothetical on their main site but are the same numbers that morningstar reports, so they are not really hypothetical. Like everything else in life for most people, if you have good numbers you want to show them and if you don’t then you don’t want to show them.
Here are some disclosures before I disclose;
Past Performance is not indicative of future results. All investments involve risk, including loss of principal. Further, the principal value of an invest- ment will fluctuate; thus investor’s equity when liquidated may be worth more or less than its original cost. This document provides only impersonal
advice and statistical data and is not intended to meet objectives or suitability requirements of any specific account.
The analysts and employees or affiliates of Company may hold positions in the stocks or industries discussed here. You understand and acknowledge that there is a very high degree of risk involved in trading securities. The Company, the authors, the publisher, and all affiliates of Company assume no responsibility or liability for your trading and investment results. Factual statements on the Company’s website, or in its publications, are made as of the date stated and are subject to change without notice.
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results of any individual trader or trading system published by Company are not indicative of future returns by that trader or system, and are not indicative of future returns which
be realized by you. In addition, the indicators, strategies, columns, articles and all other features of Company’s products (collectively, the “Information”) are provided for informational and educational purposes only and should not be construed as investment advice.
Examples presented on Company’s website or this blog are for educational purposes only. Such set-ups are not solicitations of any order to buy or sell. Accordingly, you should not rely solely on the Information in making any investment. Rather, you should use the Information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment.
GROSS NUMBERS;
They are a million questions when it comes to numbers, specifically;
1 year returns, how far can you go back.
Instruments that were traded.
Style.
Is a long and short, only long, is fully invested like the SP500.
What are the limitations to the strategy. etc….
is this a one hit wonder.
What are the fees.
How does the strategy fair during corrective markets.
Is this the top.
Is it the same strategy for all the clients.