S C L C R E TIR E M E NT P L A N SPO N S O R S : I N S I G H T
I NSTITUTIONAL INVESTORS: INSIGHT Pound Foolish AUTHOR:
DATE:
Kristor J. Lawson, Principal
March 13, 2013
It is interesting to observe how financial industry trade journals reacted to the recent publication of the book Pound Foolish, by
financial columnist Helaine Olen. The book has mostly been condemned as a biased example of muckraking journalism (although
Business Week has given it a fair review). But only a few trade publications have even noticed it. Why might that be?
Perhaps it has something to do with the fact that the financial industry’s lobbying effort to limit the regulatory reach of the DoddFrank Act is currently in high gear. Much of the controversy focuses on the SEC’s attempt to apply a fiduciary standard to all those
who provide investment advice to retail consumers. Registered Investment Advisors, such as Schultz Collins Lawson Chambers, Inc.,
have long been required to adhere to a fiduciary standard, but not so for stockbrokers, insurance agents, and other salesmen. Much
of the financial industry is working to water down the final regulations, and lobbying groups are donating considerable sums to both
Democratic and Republican law makers.
On a different front, the Department of Labor found itself under pressure from the financial services industry as it proposed new
rules for fee disclosure and conflict of interest transparency for participant directed defined contribution plans. Our Retirement
Plan Services practice leader Jon Chambers testified in favor of full disclosure at congressional hearings in Washington, D.C.
Finally, even some Registered Investment Advisory firms try to limit their liability by “contracting out” of their fiduciary duties—
i.e., drafting advisory agreements in such a way as to exempt them from certain duties customarily obligatory for fiduciaries.
Pound Foolish focuses primarily on financial advice offered to individual investors by financial planners, registered investment
advisors, brokerage firms, and mutual fund companies. The popular financial press rarely produces anything really informative,
but Pound Foolish is both enlightening and entertaining. It does feature its fair share of hare-brained statements and wrong-headed
prescriptions that have us wincing. However, Olen has done a lot of digging over the years, and much of what she has
found is quite interesting.
For example, have you ever wondered:
• How Suze Orman grows rich from promoting her self-help empire?
• How Jim Kramer’s stock picks on the Mad Money show panned out for investors?
• How much money the guru of day-trading stock picking systems made by selling products to unsophisticated customers, and
how much money he lost through his personal day trading activities?
• How the folks who invite you to a free dinner at an upscale local restaurant define the phrase “investment education?”
• How a skeptical financial planner managed to get his dog on a promotional and marketing list for “America’s Top Planners?”
SCHULTZ COLLINS LAWSON CHAMBERS, INC. PAGE 1 INSTITUTIONAL INVESTORS: INSIGHT Pound Foolish March 31, 2013 • How Robert Kiyosaki (Rich Dad, Poor Dad) generates a huge income by convincing investors that they are only one more
“advanced-level” seminar away from easy wealth?
Here are some brief excerpts:
“Orman got a job at the Buttercup [a bakery in Oakland], where her cheerful manner earned her a fan base among the regular
crowd—so much so that when she confided to one that her dream was to own her own establishment, her loyal customers raised
$50,000 for her venture. Orman took the borrowed funds to Merrill Lynch, where a broker who swore he would put her in safe
investments did no such thing. The money was lost within a matter of months … She marched into the Merrill Lynch offices and
demanded a job. On her first day of work she turned up with a crystal, which she used to determine how her clients should
invest.”
“These experts paint themselves as our financial saviors, while often neglecting to mention they are making a living (and a good
living!) not just from their television appearances and books, but by their agreements with everyone and everything from mutual
fund companies and credit reporting agencies [sic]—not to mention the host of products they try to sell us. This sets up a basic
conflict. These experts need to sound authoritative to get our attention and convince us they alone have the answer. But if they
actually had the answer, we would no longer need them, effectively ending their reason for business.”
“Edward Jones, in fact, advertises itself to potential recruits by telling them ‘excelling here doesn’t require a finance degree or a
financial background.’ Successful graduates will ‘experience unlimited earning potential’ with ‘commissions based on your sales’
and ‘incentive travel opportunities (Hawaii, Africa, the Caribbean, China and more).’”
“But wording is key and needs to grab the reader. The best way to do this, according to numerous marketers, is through fear …
‘Will your retirement survive the economic meltdown?’”
“… the culture of commission [is] where so-called financial advisers make their best money not by offering up the best advice for
their customers, but the best advice for their own bottom line …”
These are just a small sample of Olen’s revelations. The book rises above mere muckraking thanks to its meticulous documentation
(in the extensive endnotes) of its substantive claims. The author did her homework, and makes few unsupported assertions.
It should also be said that the book is written in a most approachable and entertaining fashion.
SCHULTZ COLLINS LAWSON CHAMBERS, INC. PAGE 2 INSTITUTIONAL INVESTORS: INSIGHT Pound Foolish March 31, 2013 Meet Your Author Kristor J. Lawson: P R I N C I P A L Kristor J. Lawson (Secretary, Treasurer, Managing Shareholder, and Chief Compliance
Officer) is a founding principal of Schultz Collins Lawson Chambers, Inc. He has provided
investment advisory services to legal and accounting firms, charitable institutions, and
entrepreneurs on investments for more than 30 years. He works with investors on
planned giving, estate, and retirement planning issues. Mr. Lawson has been published
in the Journal of Asset Protection and the Journal of Financial Planning, and is a
member of the Financial Planning Association. From 1989 to 1993, he was Manager of
the Bay Area Branch of Transamerica Financial Resources, Inc. (member FINRA), where he supervised 25 financial consultants,
assisting with their most difficult financial and estate planning cases. From 1993 to 1995 he played a similar role as Director of
Financial Center Development for the Bay Area Financial Center of the Acacia Group and Calvert Securities, Inc. (member FINRA).
Mr. Lawson is certified as a Financial Planner by the Certified Financial Planner Board of Standards, and holds Chartered Financial
Consultant, Chartered Life Underwriter, and Registered Employee Benefits Consultant designations from the American College in
Bryn Mawr, PA. He is a Registered Principal of Financial Telesis, Inc. (member FINRA). He studied philosophy, economics, and
psychophysiology at Indiana University, Bloomington.
Rev March 2013
© 2013 Schultz Collins Lawson Chambers, Inc. All rights reserved.
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