Some advisors will certainly feel blackmailed by this system. It may feel intrusive and even a bit like extortion. On the other hand, it might cost you just $50 to pick up an ideal client. If you refuse to pay the $50, the prospect is told the advisor has declined to submit to the background checks and no information will be released to them. Of course, at this point the advisor's record is clearly suspect, and AdvisorBackgroundCheck gives the prospect names of full members in his area, if any.
So what's in it for you? Full disclosure. Also, you may have an erroneous complaint on your record that AdvisorBackgroundCheck would discover and then give you the opportunity to correct.
EvaluateMyAdvisor.com
After Norm Pappous was laid off from Merrill Lynch last February after 15 years in the financial markets, he started EvaluateMyAdvisor.com to counter what he perceived as the low level of investment knowledge held by most wirehouse financial advisors.
His belief is that most wirehouse advisors are little more than skilled hand-holders, so his site enables advisory clients to determine if their advisor is adding value to their portfolios. The basic concept is that a client or her advisor logs on to the site and pays $500 to purchase an evaluation report, and then either the client or her advisor enters the data necessary to produce the report.
The advisor or client must enter at least 37 consecutive months of portfolio data; a portfolio's monthly "time-weighted" returns or deposits, withdrawals and monthly ending balances; and the asset allocation model that the advisor used.
EvaluateMyAdvisor compares a portfolio's cumulative and annual performance to an appropriate benchmark; assesses its annual and quarterly risk; determines how much of the market's rise or fall the portfolio is capturing; and calculates its alpha, beta and Sharpe Ratio. Other reports also are provided.
"A lot of people thought what we're doing was an attack on advisors, but it's not," Pappous says. We're trying to make certain that good advisors get all the business they can handle, and that others find a new career."
The report may be somewhat technical for the average client and draws no conclusions. "We're trying to develop a normal 'street talk' explanation of our graphs," Pappous says, adding that the report will eventually include an executive summary in the first few pages with check boxes indicating whether value is being added.
-- David J. Drucker
Native Tribe Buys Broker-Dealer
The Lower Brule Sioux Tribe in South Dakota has bought Westrock Group Inc., a New York-based financial services firm that includes an independent broker-dealer. Westrock becomes the industry's first financial services firm to be wholly owned by a Native-American tribe. The terms of the deal--which marries a Park Avenue office with a Great Plains reservation of rolling shortgrass prairie, hills and buttes-weren't disclosed.
It's a groundbreaking deal for both parties, and each stands to benefit in different ways. Westrock's new status as a Native American-owned company could give it a leg up on getting government and pension-fund business, and it could also benefit from underwriting deals syndicated by the largest Wall Street firms, which must allocate a certain percentage of business to minority-owned companies. The tribe hopes to use a portion of company profits to bolster economic activity and improve housing, education, health care and infrastructure on the reservation.