Financial Advisor Marketing & Technology

Marketing & Technology For Independent Financial Advisors


Archive for January, 2009

Shooting Myself In The Foot On Linkedin

Leave it to me to discover anti-social networking and shoot myself in the foot on Linkedin.

I recently decided to test the efficacy of social networking applications by increasing my activity on Linkedin. I’ll let you know how it is going in coming weeks. I spent a couple of hours this past week enhancing my profile on Linkedin by adding my blog to it and inviting about 75 people to “join my network,” which is Linkedin lingo for “friending” people on Facebook—connecting with them. I then asked a handful of longtime clients to “recommend” me in my role as CEO of Advisor Products. The results were nice. Several advisors responded immediately by saying great things about me and my company. It was recognition that I genuinely appreciated. I’ve worked hard to turn my company to the next level in the last three years and this was recognition. It felt great. And then the sweetness turned ugly.

One of the people I asked for a recommendation, a long-time client and an advisor I respect, responded with glowing praise for me and my company. But he also asked that I reciprocate by recommending him.

I wrote back explaining that I could not recommend him. I have 1,800 clients that Advisor Products works with and recommending one advisor over another was something I wanted to avoid.

Last night, the advisor emailed me and asked me to delete his recommendation for me. He said that he works with reporters and they recommend him and could not understand why I would not do so. I was trying social networking to see if it could help my business. Instead I offended a client who now resents me.

I emailed him back explaining that the recommendation he gave me was for me in my role as CEO of Advisor Products and not in my role as a reporter. The recommendation was about the services Advisor Products offers, not about my work as a reporter covering the industry.

I also explained that I could not recommend him as an advisor because he was not my advisor. I buy no services from him and can’t in good conscience act like I know whether he provides good advice and good service because I am not a client of his—although everything I know about him would lead me to believe that he’s a great advisor and runs a very fine client-oriented business, I don’t have hard evidence of this. Moreover, if I say this about him, the other 1,800 advisors who use my service may feel slighted.

At the same time, however, he can recommend me because his firm has been a client of Advisor Products for more than 12 years. My company has been hired by his firm every year for all these years and has been providing service to his firm many times every year. His relationship with me was different from my relationship with him.

Moreover, I don’t think it is proper for reporters to be offering sources or potential sources recommendations. Quoting someone in a story as an expert is an endorsement in and of itself. Offering up blanket recommendation of an advisor is not something I want to do. When I quote an expert source about his opinion on PMS software, creating intentionally defective grantor trusts, or how to know whether a private placement is a good investment, I am finding experts in that particular area. I don’t want to be on record recommending an advisor’s practice just because he is expert in one particular area. And how do I know if he gives good service or investment advice? People recommending advisors that they know almost nothing about are irresponsible. Just ask any of Bernie Madoff’s investors.

Other advisors who in the past have asked me for recommendations have always understood my position and dropped the request after I declined to recommend them and explained why. I’d like t know what you think.

All day, I’ve been thinking this. I feel terrible. Was I wrong? Should I have given this advisor a recommendation? I think I'm doing the right thing. Please post any comments and let me know what you think.

Fraud Outbreak Makes Posting Form ADV A Must

The Securities and Exchange Commission took emergency action Wednesday to charge Nashville, Tenn.-based investment advisor Gordon B. Grigg, 46, and his firm, ProTrust Management, Inc., with securities fraud, and the agency obtained a court order freezing their assets.

“The Complaint alleges that ProTrust, a Tennessee corporation with offices in Nashville, is engaged in ongoing securities fraud,” according to the litigation release posted on the SEC’s website earlier today. “The Complaint further alleges that Grigg is a purported financial planner and an investment adviser who controls ProTrust.”

The SEC alleges that Grigg and ProTrust defrauded at least 27 clients out of at least $6.5 million and misrepresented that their money was invested in the federal government's Troubled Asset Relief Program (TARP) and other securities that, in reality, do not exist. The SEC alleges that Grigg bilked investors by selling them private placements and then fabricated account statements for the non-existent U.S. Government-guaranteed commercial paper and bank debt.

Grigg and ProTrust consented to the emergency relief sought by the SEC. William J. Haynes, Jr., a U.S. District Court Judge for the Middle District of Tennessee, Nashville Division, issued a temporary restraining order to prevent Grigg and his firm from further violations and froze their assets. While the ProTrust website is no longer online, the image to the right obtained by from WayBack Machine was previously on the firm's home page.

Grigg's scheme begain in 2003, according to the SEC complaint. In August 2007, the says charges, Grigg recommended that a client in North Carolina and a client in California, each of whom was a retired U.S. Air Force pilot, invest in “Private Placements.” Grigg “falsely and fraudulently” told the two piltos that the Private Placements were not available to individual investors but were available to his clients through the pooling of their funds. One client wired $237,000 and the sent $100,000 in cash.

Grigg, from approximately January 2008 through December 2008, faked monthly account statements to the North Carolina client, reporting positions in a $100,000 “Jumbo Corporate Debenture” with an 8.15% fixed annual return and a $132,000 “Kohlberg Kravis Roberts” investment product with a 14% fixed annual return. “In fact, no such investment products had been purchased by the Defendant,” says the SEC complaint, and no such KKR investment product exists.

Last month, the scheme took a new turn when, according to the SEC, Grigg mailed correspondence to the two pilots saying his firm “had access to debt guaranteed by the U.S. government through the government’s TARP program.”

ProTrust Management has been a very small participant in a partnership that is headed up by Berkshire Hathaway and Kohlberg Kravis and Roberts, or KKR,” Griggs reportedly wrote in a letter to both of pilots. “Via the partnership, ProTrust has purchased over eight million dollars worth of banking debt and commercial bank paper over the last five years with interest rates from 7.5% to14%. ProTrust was offered to participate in the latest offerings with Morgan Stanley and Goldman Sacks [sic] through investments and loans.”

Added Griggs, “I agreed with the partnerships and committed to over $5 million dollars of commercial paper offering 12.5% in government-guaranteed commercial paper and bank debt. Griggs, in the portion of the letter provided by the SEC, declared: “This is an amazing opportunity as we now have a U.S. government guaranteed 12.5% bank debt. If you do not want to participate in the 12.5% government guaranteed fund please send me the enclosed liquidation form.” An additional 25 clients were told a very similar story by Griggs, the SEC alleges.

Perhaps most disturbing is that Grigg was terminated as a registered representative of a broker-dealer on April 25, 2002 for multiple compliance violations. In addition, on June 28, 2006 Grigg and ProTrust were the subjects of an administrative cease-and-desist order issued by the North Dakota Securities Department. North Dakota ordered them to pay restitution and a civil penalty of $570,000 for falsely representing to a client that her funds had been invested in certificates of deposit and other securities. The state authorities found that Griggs and ProTrust had violated registration and anti-fraud provisions of the state’s securities laws.

The 2002 and 2006 charges raise questions about why regulators at FINRA and the SEC did not discover Grigg’s alleged scheme earlier. If the SEC charges are true, Grigg brashly continued his fraudulent ways two and a half years after the North Dakota securities regulators identified him as a repeat securities offender.

Grigg’s case is the latest in a series of frauds that have unraveled after the market fallout, when nervous investors began trying to redeem their money only to learn that it was gone. None of the recent fraud cases compare to the $50 billion Ponzi scheme allegedly perpetrated by broker-dealer Madoff Securities and its disgraced founder Bernard Madoff, but the number fraud cases involving investment advisors in recent weeks has suddenly escalated to what appears to be an unprecedented level.

On Monday, Nicholas Cosmo, a Long Island, N.Y. investment-firm owner, surrendered to federal authorities. Mr. Cosmo allegedly raised more than $370 million between 2006 and 2008 by promising investors 48% annual returns from funding commercial loans, according to a federal affidavit in support of his arrest. On Tuesday, authorities arrested Arthur Nadel, the missing Florida hedge-fund adviser, who was accused by federal authorities of defrauding clients of millions of dollars. Less than two weeks ago, A Hamilton County Indiana Superior Court judge froze financial advisor Marcus Schrenker's assets and those of his wife after Schrenker reportedly parachuted out of his company-owned plane over Alabama Sunday while the plane continued flying on autopilot before crashing into Florida swampland two hours later. After a manhunt, Schrenker was apprehended and is now in custody.

As of today, Advisor Products, a leading developer of websites for for financial advisors, is recommending that all Registered Investment Advisers it serves post a Form ADV on their website, or a link to the SEC’s Investment Adviser Public Disclosure website where consumers can view the Form ADV. In both the Cosmo and Grigg cases, prosecutors allege the advisory firms were unregistered. So a Form ADV provides assurance to clients and prospects that you are properly registered and subject to SEC inspections.

Latest news about the Grigg case.

Latest news about the Cosmo case.

Latest news about the Schrenker case.

Latest about the Nadel case.

A Must-Read For Advisors

Clients demand and deserve a well-informed advisor. To help you stay on top the news and best thinkers, you may want to consider purchasing an Amazon Kindle.

If you commute daily via public transit, read a lot of books, travel often, or want to read while exercising, then the Amazon Kindle is probably good idea. The Kindle is a Amazon’s wireless reading device. You can buy books for less than you'd pay online and get newspapers delivered daily into this lightweight device. At $359, it’s not inexpensive. But if you qualify for any of the groups outlined above and are not on a tight budget, then you’ll get your money’s worth.

I bought my Kindle about six months ago after seeing it at a friend’s house. He reads a lot of books and raved about it. Gadget-freak that I am, I had to have one. I received a $100 discount by opening an Amazon Visa card account, a special no longer offered. In fact, the Kindle proved so popular during the holiday season that Amazon ran out of them and remains out of stock. The main features:

· High-resolution highly-legible screen
· You’ll learn how to use it in 30 seconds
· Wireless connectivity from almost everywhere
· Buy books wirelessly in less than a minute
· Most New York Times® Best Sellers and New Releases are $9.99
· Top newspapers including delivered wirelessly daily
· About the size of a thin hardcover book and weighs only 10.3 ounces
· Holds about of months the New York Times of newspapers or over 200 books
· Battery lasts three days, maybe four and recharges in 2 hours

The Kindle is not for you if you read your newspapers over the Web and do not read a lot of books. However, if you read more than a book a month and are an avid newspaper reader who does not read papers on the Internet, it can be a handy item.

I don't read newspapers online because I'm too busy at work. I read the newspaper while I am exercising. I place my Kindle on my elliptical trainer. If you use a treadmill or stationery bike, it'll work for you, too. Four or five times a week, I put on my Bluetooth headphones, which are synched up with my cell phone, and I play my favorite music while also watching CNN with the Closed Captions running. And while I am listening to music and watching CNN, I read the NY Times and Financial Times. Being bombarded by all this media makes me forget I’m exercising, and I keep my heart rate at about 140 beats per minute for 60 minutes.

I’ve always read the NY Times daily and turning pages of the broadsheet while on the elliptical is annoying. Over the years, I've tried out many reading racks that attach to my exercise machine, but nothing is as easy as the Kindle. Plus, the type is slightly larger. The NY Times Kindle Edition costs $10 a month, and so does FT. I would drop daily delivery of the Times to our door if my wife and kids did not need it. That would make the Kindle a money-saver.

The Kindle has allowed me to read FT regularly for the first time in my life. For this reason alone, it was worthwhile investment. FT is a great newspaper. You get a different perspective on the financial crisis. One disappointment is that the Kindle edition of FT does not include FT's many fine columnists, like Martin Wolf. (Fortunately, you can get RSS feeds of FT columnists delivered into your computer with a free subscription to FT.)

I don’t read many books because I'm a news junkie. For bookworms, however, the Kindle can be a money-saver. Books cost about half as much and you don’t pay tax on them. Plus, you don't have to go to a bookstore and can carry your entire library with you in your brief case. It’s convenient when you go on vacation and want to bring two or three books.

For me, the big benefit of the Kindle is that it lets me multi-task while I exercise. It’s important that I exercise because I like to eat, especially deserts. So it’s good that I burn calories while reading The Times. With the Kindle, I can have my cake and read it, too.

Indiana Financial Advisor Jumps From Airplane To Fake Death, Then Vanishes

A Hamilton County Indiana Superior Court judge froze financial advisor Marcus Schrenker's assets and those of his wife late yesterday, after Schrenker reportedly parachuted out of his company-owned plane over Alabama Sunday while the plane continued flying on autopilot before crashing into Florida swampland two hours later. A manhunt is under way, according to reports.

Click here for the latest news about this strange incident.  


Video Explosion

Everyone knows that TV and the Web are melding. Videos are increasingly being used on the Web. yesterday reported that U.S. Internet users viewed 12.7 billion online videos in November 2008, a 34% increase over the same time a year earlier. On YouTube this past November, 5.1 billion videos were viewed; more than 146 million U.S. Internet users watched an average of 87 videos each, and the average online video viewer watched 273 minutes of video.

What’s really scary is that in my lifetime, we’ll probably be able to click on the couch that Oprah sits on and see its manufacturer and lowest price vendor. (My wife will bankrupt me!)

The benefits of using video on the Web are undeniable and Advisor Products is responding to the trend. We posted video-help two weeks ago for AdvisorVault, our secure online platform for sharing documents with clients and other professionals.

Steve Schopp, a staffer here responsible for training advisory firm personnel on AdvisorVault, tells me he is suddenly spending a fraction of the time on previously needed one-on-one training. Steve says he shows our clients where they can find the video help and tells them to call with any questions. What was previously a one-hour training session now takes about five minutes. While we also have a user’s manual with detailed textual instructions and screen shots, watching a video is much easier (and I’m a writer). Our vault-help videos cover the following topics:

Setting Up A Password Creating An Advisor
Set Up Vault Template Folder Creating A Client
Manage Documents Bulk Upload PortfolioCenter PDF Reports
Bulk Upload PortfolioCenter Reports Changing Permissions
Setting Up A Professional Resetting A Client's Password

Advisor Products is currently working on a project to provide videos for advisors to use on their websites. More about that in a few weeks.


Looking Back On 2008

2008 was not a good year for a lot people. For Advisor Products, however, it was a great year.

While the Standard & Poor’s 500 lost 32% and the Dow Jones Industrials fell 37%, Advisor Products showed double digit sales growth. Moreover, we streamlined processes and dramatically improved our client service. I hope you can learn about how to improve your business by looking back at our key accomplishments in 2008.

Customer Service. Gone are the days when clients complained about not receiving calls back or when deadlines were not met by our staff. We now assign a project manager to every client's project. One person owns every job. Clients know who to call when they have a question and our staff is more accountable.

New Hires. We lost several staffers in 2008 and replaced them by making great hires—David Lucs, a project manager, Brien Shanahan, a content manager, Steve Schopp, an HTML expert and project manager, and Jim Voss, our operations manager.

Manual. A lawyer rewrote our company manual, setting clear rules for everyone who works at Advisor Products. By re-distributing the manual and getting everyone to sign a form saying they have received it, it makes it easier to enforce rules about attendance, vacation, and lateness.

Outsourcing Email Support. We hosted hundreds of email accounts. But this was not core to our business, contributed almost nothing to our revenue, and support questions were overwhelming our staff. So we partnered with a company that specializes in email hosting. Email service is now faster and more reliable, and support is better and available 24/7.

Integration. Our website platform is now integrated with a long list of applications used by advisors. We now have interfaces with 11 applications used by advisors and plan to launch interfaces three others in 1Q09.

Performance Reporting

CRM Financial Planning Account Aggregation Form Filling
Advent Axys* Redtail FinanceLogix Advisor Exchange LaserApp
Albridge Solutions XLR8 MoneyGuide Pro ByAllAccounts*
AssetBook EZ Data SmartOffice*
Black Diamond Reporting
Orion Advisor Services
Schwab PortfolIoCenter
*Launch planned for 1Q09.

Technology Project Manager. We engaged a consultant who is a certified PMP (Project Management Professional) and expert in managing technology development projects. We met weekly with him to get organized.

Content. Since our financial planning coverage is a key differentiator that separates us from our competitors, we invested more in it. In 2008, we more than doubled the number of stories we wrote in 2007.

Customer Tracking. We invested heavily in our proprietary web-based CRM system. Key staff met weekly for months to plan changes to the system. The sessions culminated in developing new features that will go live in the next few weeks. All emails to and from our clients will automatically be saved in the client’s folder. So will recording of all phone calls.

AdvisorVault 2.0. Our vault system, perhaps the most advanced online document vault ever offered to advisors, was rolled out and received rave reviews from advisors. On a .NET platform and using Microsoft SharePoint, the vault allows clients as well as advisors to upload documents to the vault and offers high security and redundancy.

Performance Reporting. We developed a system that is integrated into the vault that allows advisors to distribute dynamic HTML as well as PDF performance reports online. The PortfolioCenter version went live two months ago and the Advent Axys reports go live in a few weeks.

Custodian Deal. Schwab Institutional announced it would close down its Advisor WebCenter business and began recommending Advisor Products as a vendor for websites. Many Schwab advisors are switching to our website platform.

Manager Meetings. The four key managers in the company began weekly meetings every Monday morning to talk about our goals, and we instituted a brief follow-up meeting every Thursday afternoon to ensure we were on track toward accomplishing what we said we would.

Client Portals. Our client portal platform, an innovative way for advisors to use the web to strengthen client relationships, was finally launched early last year. About 20 advisory firms are now using the system. We expect the platform to move from early adopters to mainstream advisors in coming months as relationships based on financial planning advice, rather than transactions, become more important.

To my staff at Advisor Products as well as our clients, I am thankful for the support and kindness you showed me in 2008, and you have my best wishes for a healthy and happy 2009.

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