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Guest Skeptical

Scott Burns Cashes In

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Guest Skeptical

 

EXCERPT: I don't disagree that RIA's should be clear and candid - but I guess I don't see where Scott Burns is not being clear - perhaps you can point this out...

 

 

Why is he not including fees? No idea, the whole idea of providing a back-tested model seems to me to be the real problem as anyone can do this and have the hindsight of 20/20. Perhaps he'd have to run the model at each price interval of .25% and .50% and all steps in between - I really don't know. But he clearly discloses that the portfolio is fictional and backtested and doesn't include his fees:

 

 

For the life of me I can't figure out why Scott Burns is the guy you choose to go after, he's clearly one of the good guys and his firm is clearly targeted to those people who want hand holding - NOT the one's who WILL do it themselves using the Vanguard funds portfolio's he provides for FREE.

 

If you want to be critical of Scott Burns and AssetBuilder - no problem, but their is no balance - you accuse him of "cashing in" - the way you portray him sounds as if he is just as bad as some guy selling Allianz Equity Indexed Annuities. He has stated his "value prop" and its up to people to decide if in fact it makes sense.

 

Again, It seems to me that Burns is one of the good guys (even though he did jump ship to compete with me!!) and while its OK to try to make him even better, to treat him as pond scum and make an example of him as if he is pond scum.........that is going too far.

 

ScottyD

 

 

Scotty,

 

For the record I'm not calling anyone or treating anyone as "pond scum". I'm trying hard in this thread to listen and understand why you feel so strongly, and defend so vigorously, these marketing practices. It would be simple to run the charts with the maximum adisory fee (or the average paid by current clients). In addition it would be easy to deduct the Schwab trading costs as well. There would be only ONE reason to avoid doing so; to make the results appear as strong as possible. The use of footnotes is a poor practice. Even brokerage expenses listed in an SAI by a fund family is disclosure, but that doesn't make it right.

 

Here's a better example:

 

At least some of these (hypothetical) portfolios like #10, use a commodity component, specifically the Powershares DB Commodity Index Tracking Fund. This fund DID NOT EXIST prior to 2/3/2006. So in order to create the hypothetical portfolio, they pretend it did exist, applying the current expense ratio to the DB Commodity Index from 2000 forward. So to be clear, the portfolio not exist and neither did one of the components. It doesn't matter whether this is disclosed, what matters is that many, many investors will never take the time to dig deep, read the footnotes, and understand what it all means.

 

WE CAN DO BETTER THAN THIS!

 

Also, Mr. Burns didn't jump ship. He's still writes the same finance column he has always written. Most readers will not understand the difference between writing as a staff reporter / journalist with strict barriers against working in the industry about which they write, and an advisory firm principal who also writes syndicated finance articles. He will not be quoted or identified as Investment Adviser, but rather as the veteran journalist.

Jim

 

EDIT:

 

HSCounselor remarks in this thread that many investors are indeed misled by these types of charts: "and I had not trusted their (empasis added) high return charts and their projected "conservative" returns, I would probably be at least 60-80,000 further ahead than I am."

 

 

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The fact remains that the hypothetical fully discloses and is transparent that the fees are NOT included. I said I don't like the hypothetical and feel it is not needed in order to obtain clients - a proper explanation of Philosophy is what is important.

 

You claim the performance claims are misleading, yet these are not performance claims, Burns is not making a claim of ANY performance that he has achieved - simply a hypothetical of how a portfolio he might manage would have performed against a given index. Again, I think the whole charge is irrelevant - but it would only be misleading if he DIDN'T indicate that the chart failed to include the advisory and transaction fees.

 

I have no idea why he doesn't include the fee, it would be easy to do and he should do it. But the claim that he is misleading the public while having disclosure language directly underneath the chart that is easy to read is a stretch. Your original post did not mention this at all.

 

I'm not defending his chart, simply pointing out that he wasn't hiding anything. You can criticize him all you want, its clearly disclosed.

 

Instead of posting something that talks about Scott's new RIA practice and how he could do a few things to improve his website which would make him even more credible you attack him as part of the "Industry". The way Scott practices appears to be nothing like the industry and to make a direct comparison with no balance is what is misleading. You prefer the flashy headline to the actual facts.

 

ScottyD

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Guest Skeptical

...You claim the performance claims are misleading, yet these are not performance claims, Burns is not making a claim of ANY performance that he has achieved - simply a hypothetical of how a portfolio he might manage would have performed against a given index.

ScottyD

 

Scotty,

 

These marketing graphics are without question used to imply strong performance. The use of the bold page title "PERFORMANCE SUMMARY AS OF MARCH 2008", as well as the footnote phrase "Performance data shown represents past performance", is designed to encourage prospects to believe that Asset Builder has a strong performance record managing money. That is just not accurate. I do applaud them for using the word FICTION in the footnotes. Note your choice of words: "hypothetical, might, would have". What if a major 403d provider used the exact graphics, listing the admin fee, mortality & expense fee, and contract charges as a footnote. Would that be OK with you? Is it really the amount of the fees that cause the problem or that Burns is a good guy? I don't think so.

 

Are the costs disclosed? YES.

 

Are they inaccurate? NO.

 

Are the graphics a lie or fabrication? NO

 

Are they misleading? Yes

 

Why? Because when investors look at the page that boldly says "performance summary" we know it's just the gross numbers while the actual returns (hypothetical as they may be) are / would be WILDLY different. Do you find it acceptable to create performance numbers for a security that didn't even exist at the beginning of the measured period?

 

Regards,

 

Jim

 

p.s. If you think there are better topics to post then please by all means do so. If you think this thread is unimportant and is not worth your time, feel free to not participate. As you know, as as noted in this thread, there are some pretty darn good "model portfolios" available through Vanguard with an ACTUAL track record and no additional advisory fee. Investors might compare the two offerings and make their own determination regarding the value proposition.

 

Cheers,

 

Jim

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You can't make completely erroneous graphs and charts that show your point as long as you write in the fine print below: "The above chart is completely fictitious. They cannot be relied upon to make investment decisions."

 

That may be legal in some eyes, but definitely not moral!

 

If you're going to charge fees, and make a "representative" graph. (We all know it's meant to be representative to the public, regardless of what the fine print says - what average invester will ever read that??) At least try to make the graph truly representative, and include all possible charges and fees in a realistic environment. It shouldn't be too much to ask.

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Now Scott Burns is immoral and has posted Wildy misleading performance numbers.

 

 

I do find it OK to utilize historical index data (commodity) to create a hypothetical, the fact that an index fund for that category was not available does not mean that the performance didn't occur (this assumes the index was available - not a made up hindsight index) - just that the index fund for that index wasn't available. This type of data is used all the time by researchers - heck, the first S & P 500 index fund wasn't created till the 70's - should we throw out all performance data before that because a Fund wasn't available?

 

I've stated several times that i don't agree with the use of the hypothetical, but my point still stands - the entire page is filled with words like Hypothetical, Fiction, Back-Tested, "don't include advisory fees", past performance, yada yada.

 

You accused him of misleading people with that page, that is a stretch and then you paint him as if he like an Equity Index Annuity salesperson or VA salesperson or someone working for Merrill Lynch.

 

My point is that he IS different than the VAST Majority of the industry and apparently WANTS to do the right thing and has gone about it in the RIGHT way.

 

He has obviously not thought this page of his website out very well and should reconsider it (my position all along) but that is a far cry from the attacks he is receiving from people on this board - he is not a demon.

 

I think what is misleading is not the webpage (which should be revised, but is fully disclosed) is the link leading to that page which states "Compare Asset Builder Portfolios To The Major Indices" - clearly the company was not in business during this time period so they are not actually "AssetBuilder" portfolio's but portfolio's that had the benefit of 20/20 hindsight.

 

Other than JLP - did anyone here attempt to contact Scott Burns and in a respectful manner ask him to make some changes that would continue to add to his credibility? If so, let us know his response - I'm sure he would be open to the suggestions. Instead we get a headline that Scott Burns has "cashed in" and is now no different than "the industry".......rather than help build up those who are the good guys, an attempt is made to tear one down. If you contact Scott and he tells you to bugger off.......now you got yourself a story.

 

ScottyD

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Guest Skeptical

I've stated several times that i don't agree with the use of the hypothetical, but my point still stands - the entire page is filled with words like Hypothetical, Fiction, Back-Tested, "don't include advisory fees", past performance, yada yada...

 

He has obviously not thought this page of his website out very well and should reconsider it (my position all along)...

 

 

I think what is misleading is not the webpage (which should be revised, but is fully disclosed) is the link leading to that page which states "Compare Asset Builder Portfolios To The Major Indices" - clearly the company was not in business during this time period so they are not actually "AssetBuilder" portfolio's but portfolio's that had the benefit of 20/20 hindsight...

ScottyD

 

So because he used all the required legal hedges: "Hypothetical, Fiction, Back-Tested, "don't include advisory fees", past performance" it's acceptable? I simply disagree. We seem to agree that the Banner link to the models imply that Asset Builder has a real track record of performance. This should be corrected as well.

 

The adjective "WILDLY" was sloppily placed so that it seemed to describe the Burns portfolios. My error as it was meant to describe: "a major 403d provider used the exact graphics, listing the admin fee, mortality & expense fee, and contract charges as a footnote". My question to you remains: If a provider excluded admin fee, M&E expenses, and contract charges (say 3% annually) from their performance charts while disclosed in the footnotes would that be OK? Because if the practice is fine it doesn't matter who's doing it.

 

Jim

 

 

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What a fun thread to read, but I think it's going in circles, so let me summarize from my perspective.

 

The entire financial industry is designed to allow investors the OPPORTUNITY to make some money, while GUARANTEEING that advisers and advisory companies make money. It's a total sham and everyone knows it. There is very little that seems truly honest about the financial industry; that's the way it's been; that's the way it is; and that's the way it's going to continue to be.

 

The fact of the matter is that just the fact that the legitimacy of the financial industry is debatable implies that it's not legitimate.

 

The fact that disclaimers exist on every piece of financial literature is further evidence that something isn't on the up and up.

 

Hidden fees, undisclosed fees, hypothetical past returns, it's a lark; but......

 

...the greatest thing about the entire industry is that it is TOTALLY BEATABLE.

 

It just doesn't take that much to learn that diversified, reasonable allocated, dollar cost averaged, low cost, indexed portfolios, over time, make a your portfolio a guaranteed winner too.

 

I know a guy who works at one of the big investment firms, and he oversees many millions for many personal investors, and I asked him, how does your boss assess you each year? Does he compare how your clients have done versus the S&P 500, or does he compare your clients performance to a Target Date Fund? His response, "performance is never assessed, I am assessed by assets under management, the more people I bring in, the happier my boss is."

 

The industry is crooked. If you claim it isn't, you're either part of the industry or delusional, my guess is part of the industry, and while I readily admit that there are honest people IN the industry, the industry itself is designed to take advantage of the weak.

 

Keep this thread going though, I am really enjoying it!

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I know a guy who works at one of the big investment firms, and he oversees many millions for many personal investors, and I asked him, how does your boss assess you each year? Does he compare how your clients have done versus the S&P 500, or does he compare your clients performance to a Target Date Fund? His response, "performance is never assessed, I am assessed by assets under management, the more people I bring in, the happier my boss is."

 

 

Bruce,

 

That is a very telling comment. This reinforces the argument that many of us make: these people in the industry are there to SELL. That is their job, and we should not kid ourselves that they are there to "advise."

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