Recognize Wall Street tactics for what they are, and make smarter decisions with your money Wall Street Potholes shares insights into the money management industry, revealing the shady practices that benefit the salesman far more than the client. Bestselling author Simon Lack brings together a team of experienced money managers to give you straight-from-the-source intel, and teach you how to recognize bad advice and when it's better to just walk away. Investors are rightly suspicious that many products are sold more because of the fees they generate than their appropriateness to the client's situation, and that's only the beginning. This book lays it all bare so you can walk into your next deal with your eyes wide open. You'll learn just how big the profit margin is on different products, and why Wall Street intentionally makes things as complicated as possible. You'll learn expert tactics for combatting these practices, so you can avoid buying overpriced products and confidently discriminate against advisors who put their own interests first. For all the volumes of investment advice on the market, dissatisfaction with the financial services industry has never been higher. This book describes the reason for that disconnect, and tells you how to see through the smoke and mirrors to make the best decisions for your money. * Discover the profit margin built into some popular products * Learn the reason behind bundling and why Wall Street fears comparison shopping * Consider the importance of benchmarking, and why so many firms avoid it * Become better informed so you can easily recognize poor investment advice If asking questions of your financial advisor only nets more confusion, if you want to have more control over your money, you need a firm grasp of how these firms manipulate your trust. Wall Street Potholes tells you what you need to know to become a smarter investor.
Preface xi Acknowledgments xiii CHAPTER 1 Non-traded REITs: A Security That Shouldn t Exist 1 Poor Advice 1 Why Not Get a Listing? 5 Disingenuous Advice 9 Whose Side Is Your Financial Advisor On? 12 Where Are the Regulators? 15 Overall Returns Are Poor 17 The Importance of Benchmarking 19 Puts and Calls 20 Financial Advisors Need to Do Better 21 CHAPTER 2 Why Investors Pay Too Much for Yield 25 The Mysteries of Closed-End Funds 25 Investors Can Overpay to Simplify Their Taxes 29 The HFT Tax 32 When Managers Run a Company for Themselves 34 The Ham Sandwich Test 37 If the Prospectus Says You ll Be Ripped Off, It Must Be Legal 38 Timing Is Everything 41 CHAPTER 3 Why Structured Notes Are Rarely the Best Choice 47 Kevin Brolley Caveat Emptor! 47 Structured Note Basics 49 Why Buy Structured Notes? 52 The Heart of the Matter: The Arguments Against 55 CHAPTER 4 Update to The Hedge Fund Mirage 69 Hedge Funds Remain a Great Business 69 Industry Reaction to the Dismal Truth 72 Why Hedge Funds Are Still Growing 74 Some Accounting Rules Are Dumb 77 Politics Drives Asset Flows 80 Too Much Capital 82 For Once, the Retail Investor Wasn t Duped 86 CHAPTER 5 Why Is Wall Street So Inefficient? 91 Why Is Finance So Expensive? 91 Trading Doesn t Build a Secure Retirement 94 Invest Time before Money 97 Sex and Investing 98 Complexity Sells 103 The Hidden Costs of Municipal Bonds 106 Some Bankers Just Don t Think 109 CHAPTER 6 The Un-Portfolio and Better Portfolio Management Techniques 115 Bob Centrella, CFA Background 118 Un-Portfolios and Diversification 120 Fees and the Black-Box Models 123 Other Examples of Un-Portfolios 125 Exchange-Traded Funds 127 Mutual Funds and Fees 128 Load Funds 130 Fiduciary Duty 131 Portfolio Management Basics 133 Summary and Conclusion 137 Bonus Section 138 CHAPTER 7 Annuities 145 Dave Pasi Introduction 145 What Is an Annuity? 147 What Are the Different Types of Annuities? 148 Variable Annuities 151 Associated Risks 152 Other Risks Are Lack of Flexibility 153 Variable Annuity Riders 154 Illiquidity, or the Lack of Being Able to Get to Your Money 157 Evaluation of Returns: Investment Options inside of Variable Annuities 158 Fee and Charges 159 Options If You Already Own an Annuity 162 When Should You Consider Using an Annuity? 163 Recent Developments with Annuities 164 Savings Bonds: Little-Known Good Deal 166 CHAPTER 8 Is the Most Important Professional in Your Life Even a Professional? 171 John Burke My Start as a Broker 172 Pressure to Generate Business 174 Why You Don t Invest with Borrowed Money 176 Has the Industry Made Any Progress? 178 Is Financial Advisory a Profession? 181 Why You Want a Fiduciary 183 More Things to Consider When You Choose Your Advisor 189 A Better Way to Measure Results 191 CHAPTER 9 Putting Investors First 197 The Future of Finance 197 Understand Who Your Advisor Works For 200 Really Understand the Fees 204 Try Asking These Questions 207 What Else Can Be Done? 210 The Role of CFA Institute 212 Bigger Isn t Always Better 215 About the Contributors 219 About the Author 223 Bibliography 225 Index 229
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