Bernie Made Off With More Than Billions

News of Bernard Madoff’s 150 year sentence will give limited comfort to some investors.  However, scandals involving Madoff and others have put a spotlight on issues of  trust and accountability in the financial services industry.

“Americans should be more concerned about the return of their money, than the return
on their money.” Mark Twain

Although Madoff’s trial has ended, investor confidence remains low and combined with economic conditions, is unlikely to change near term. As a marketing consultant, I informally surveyed a group of colleagues about what they are doing to restore investor trust and promote accountability in business transactions.

Contrary to Madoff, Adviser Investments uses a third party clearing house and complies with the SEC and other industry regulators.  Advisers who are not registered with the SEC and hold custody of assets have less credibility, and can be a big red flag to investors.  Corby Capital Markets, Inc. proactively keeps clients informed about their portfolio’s performance using a third party clearing house to collect and report investment data.  In the future, Liquidity Reserve Asset Management  believes that investments will be structured differently, becoming more transparent and easier for investors to understand.  Further, with performance anticipated to be below historical values, firms might need to realign fees closer to performance in order to attract new investors.

Do investors share part of the blame for what has happened?

Yes, particularly high profile investors who followed a herd mentality to make investment decisions vs. appropriate due diligence.  Strategic Insights recommends going beyond secondary source data to perform enhanced due diligence, especially in a strong economy.  During this time, investors are more likely to rely on direct data from high profile advisers such as Madoff, whose antics only became known when the economy began its downward spiral.

Regardless of the economic environment, individuals with fiduciary responsibility need to enhance client trust and investment accountability in both appearance and in fact.  In the qualified plan market, The CIP Group believes that advisers should take a more active role in identifying and managing the ongoing fiduciary obligations of the plan sponsor and its investment committee.

As difficult as it can be, practitioners need to communicate more openly and frequently about the downside of their client’s portfolio performance.  Afterall, when it comes to money, it’s not what you start out with - it’s what you end up with that counts.

Smart Marketing Tips

We’ve entered the second half of the year and summer has officially arrived.  Don’t be fooled into thinking that everyone is going to be taking time off.  Smart marketers will be using the next 2 months to ramp up their marketing campaigns so they can: 1) gain an edge over competitors who are less visible, and 2) hit the ground running with a finely tuned business development strategy in September.  Take advantage of this quiet time to: increase your company’s visibility and awareness in the market place, build customer loyalty for the future and renegotiate with media companies who still have to hit target.