Let the Enron debacle serve as your own personal wake-up call. Concentrated portfolios have been in vogue over the last couple of years. But the Enron debacle shows just how dangerous they can be. Thousands of Enron rank and file watched their 401(k) money go down the tubes, since around half of the $1 billion plan was invested in Enron stock.
We, for one, think it's fine for a company to match 401(k) participation with company stock (it's better than not matching at all). But it does put you, the financial intermediary, squarely on notice. You must talk amped-up investors down. When a stock soars and begins to own a bigger and bigger slice of their net worth, you've got to be the voice of reason, pointing out the risk. Now, all you have to do is mention the word Enron to grab their attention. Indeed, the scary headlines are a good excuse to call your clients and talk about their retirement accounts (see p. 18). For a reminder on the beauty of diversification, see our Endpiece on page 104.
While we're on the subject, Enron is an event that — we believe — will continue to reverberate through our industry and reps should be prepared. The questions about the reliability of financial statements will be with us for a long time and it is up to us to provide the answers for nervous clients. To maintain public faith in the markets, brokers need to do their own homework and assure investors that they are on the lookout for stupid accounting tricks.
Looking forward, we are now taking nominees for our 22nd annual Outstanding Broker Award. Feel free to nominate a friend or colleague — anyone who has a minimum three years experience, has been with his present firm for at least 12 months, is in the firm's top quartile in production and who has a clean U-4 (please submit CRD numbers, please). Which reminds me: See our Street Legal column on page 86, “Charged, Therefore Guilty,” for more on the NASDR's CRD “expungement” debate.
We urge you to visit www.registeredrep.com, our new URL, to fill out and submit the Oustanding Broker Award nominee sheet. (The form is also on page 80 of this issue.) Incidentally, we are in the process of gussying up our Web site, just as we have redesigned our magazine.
Let us know what you think. Contact us with questions, problems, concerns, story ideas, whatever, at [email protected].
(We thank you for your support. Drop us a line with your comments at: 249 W. 17th St., New York, N.Y. 10011-5300. Or email us, [email protected]. Publisher Rich Santos can be found at [email protected].)