For clarification, he didn’t manage the bank’s investment portfolio, he managed trust client portfolios.

[/quote]

If they weren't necessary as clients most brokers wouldn't walk across the street to piss on a bank portfolio manager if he were on fire.

[/quote]

Now, that's funny!

[quote=Indyone]For clarification, he didn't manage the bank's investment portfolio, he managed trust client portfolios.[/quote]

Indy, I always respect your opinion.

[quote=Indyone]For clarification, he didn't manage the bank's investment portfolio, he managed trust client portfolios.[/quote]

Quibbling difference. There is no worse investor than those who manage money for banks--regardless of their title or who owns the money being managed.

[quote=Indyone]For clarification, he didn’t manage the bank’s investment portfolio, he managed trust client portfolios.

Quibbling difference. There is no worse investor than those who manage money for banks--regardless of their title or who owns the money being managed.[/quote]

Well, you're entitled to your opinion, although your argument is a bit ironic given your self-admitted investment "strategy" with the widow...

[quote=Indyone]For clarification, he didn’t manage the bank’s investment portfolio, he managed trust client portfolios.

Indy, I always respect your opinion.[/quote]

...and likewise, tjc...we can act as gentlemen between the two of us at least...even when our perspectives differ.

...and despite appearances, I generally enjoy exchanges with NASD/PutEasy.  He's got some interesting insights...you just have to work around his tender ego (see earlier in this thread) and tendency to insult when someone disagrees with him, or otherwise doesn't measure up to his self-perceived social worth.  It's interesting to watch him casually throw insults...and then see his reaction when someone tosses a perceived slight back at him...

[quote=dude]

Damn tjc, great post.  A breath of fresh air to have someone articulately address the MPT scam that's going on (using it as an excuse to collect asset management fees).........[/quote]

tjc45, is this an even remotely accurate description of what you were saying?

[quote=dude]

Now Mikey, hold on there as I know the beast is about to be unleashed.....I'm not saying that MPT IS a scam. O.K.?  I think we all know where you and I stand on this issue so let's let a dead horse lie.

[/quote]

OK, I'll admit confusion here. Could you explain what appears to be a contradiction in your posts? Sure sounds like you're calling something a scam....

[quote=mikebutler222][quote=dude]

Damn tjc, great post.  A breath of fresh air to have someone articulately address the MPT scam that's going on (using it as an excuse to collect asset management fees).........[/quote]

tjc45, is this an even remotely accurate description of what you were saying?

Yes and no. Yes, abused and over sold by wirehouses eager to fee every client up. Especially true of the young sales force that doesn't know its ass from a hole in the ground when it comes to investing and also true of the one size fits all crowd. No, it's not a scam. It's a valid investment theory. However, it doesn't save you from a down market,even though it often advertised by the abusers as being able to do so.

[quote=NASD Newbie]

I am so proud that a thread I started has four or five pages of responses and that several of them are long well considered discussions.

It's almost as if I was as effective as Put Trader at getting things rolling.

I hope Put is doing well, wherever he is.

[/quote]

You are a serious cheeseball there NASD Easy Trader.

[quote=mikebutler222][quote=dude]

Damn tjc, great post.  A breath of fresh air to have someone articulately address the MPT scam that's going on (using it as an excuse to collect asset management fees).........[/quote]

tjc45, is this an even remotely accurate description of what you were saying?

[quote=dude]

Now Mikey, hold on there as I know the beast is about to be unleashed.....I'm not saying that MPT IS a scam. O.K.?  I think we all know where you and I stand on this issue so let's let a dead horse lie.

[/quote]

OK, I'll admit confusion here. Could you explain what appears to be a contradiction in your posts? Sure sounds like you're calling something a scam....

[/quote]

Use your eyes and read the above post by TJC.  I think he is being a little more articulate than I.  Maybe SCAM is a little harsh of a word but as you quoted ME, I clearly said that MPT is NOT a scam.  Just using it as an excuse to collect fees for an army of brokers who are getting paid to be asset gatherers not managers.  C'mon Mikey, we've had this conversation too many times before and like I said let's let a dead horse lie.

[quote=tjc45][quote=mikebutler222][quote=dude]

Damn tjc, great post.  A breath of fresh air to have someone articulately address the MPT scam that's going on (using it as an excuse to collect asset management fees).........[/quote]

tjc45, is this an even remotely accurate description of what you were saying?

Yes and no. Yes, abused and over sold by wirehouses eager to fee every client up. Especially true of the young sales force that doesn't know its ass from a hole in the ground when it comes to investing and also true of the one size fits all crowd. No, it's not a scam. It's a valid investment theory. However, it doesn't save you from a down market,even though it often advertised by the abusers as being able to do so.

[/quote]

I’m in complete agreement with you about younger FAs and the “one size fits all” crowd (although I usually find that crowd selling everyone their fav three mutual funds or their investment strategy (read: portfolio of individual stocks run by the FA that every client must own)). Also agreed that it’s abuse to claim it means your account will never decline.

<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /> 

OTOH, I don't think in my experience (all day, now) that I've seen a "down market" where every asset class is down for any real length of time, and using MPT has ensured that every portfolio has within it those elements that didn’t decline or even grew as other elements declined. My clients in balanced portfolios have seen significant gains in this period of what some people call a "down market".

What is it you mean by “fee every client up”? Should I take it to mean you don’t approve of SMAs or flat fee accounts?

[quote=dude][quote=mikebutler222][quote=dude]

Damn tjc, great post.  A breath of fresh air to have someone articulately address the MPT scam that's going on (using it as an excuse to collect asset management fees).........[/quote]

tjc45, is this an even remotely accurate description of what you were saying?

[quote=dude]

Now Mikey, hold on there as I know the beast is about to be unleashed.....I'm not saying that MPT IS a scam. O.K.?  I think we all know where you and I stand on this issue so let's let a dead horse lie.

[/quote]

OK, I'll admit confusion here. Could you explain what appears to be a contradiction in your posts? Sure sounds like you're calling something a scam....

[/quote]

Use your eyes and read the above post by TJC.  I think he is being a little more articulate than I.  Maybe SCAM is a little harsh of a word but as you quoted ME, I clearly said that MPT is NOT a scam.  Just using it as an excuse to collect fees for an army of brokers who are getting paid to be asset gatherers not managers.  C'mon Mikey, we've had this conversation too many times before and like I said let's let a dead horse lie.

[/quote]

Just trying to figure you out, dude. You use words like scam and excuse and it makes me wonder just how you think MPT should be implemented (and priced) and why brokers shouldn't be asset gatherers (to completely ignore the work they do after the assets are gathered) and hand the active management (if that’s what’s being used) off to people better able to do it.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

If you want to, what at least sounds like to me, impugn the integrity and business model of others and then leave the subject alone, fine.

[quote=mikebutler222][quote=tjc45][quote=mikebutler222][quote=dude]

Damn tjc, great post.  A breath of fresh air to have someone articulately address the MPT scam that's going on (using it as an excuse to collect asset management fees).........[/quote]

tjc45, is this an even remotely accurate description of what you were saying?

Yes and no. Yes, abused and over sold by wirehouses eager to fee every client up. Especially true of the young sales force that doesn't know its ass from a hole in the ground when it comes to investing and also true of the one size fits all crowd. No, it's not a scam. It's a valid investment theory. However, it doesn't save you from a down market,even though it often advertised by the abusers as being able to do so.

[/quote]

What is it you mean by “fee every client up”? Should I take it to mean you don’t approve of SMAs or flat fee accounts?

[/quote]

Just my cynical view of the wires that have figured out that fee biz is in their best interest regardless of whether that's true for the clients. The wires are pushing fee big time, thus the move to six figure minimum acct requirements. Cookie cutter one size fits all, off the rack progams presented as custom tailored pushed on those who don't understand what they're buying. And in many cases pushed on those who would benefit from a conventional acct. 

I'm closing a 600K new acct next week that will be fee. So I have nothing against fees. About 30% of my book is fee based. Part of that is flat fee accts. Fee based versus commission is a case by case decision. Fee is almost always the better way to go for me. However, it's got to be the best way for the client to go before we'll consider it.

Just my cynical view of the wires that have figured out that fee biz is in their best interest regardless of whether that's true for the clients.

Well, there's no doubt the wires benefit from a stable fee structure over the ebb and flow of a commission based process. There's also the fact that their arbitration costs are lower. OTOH, if the issue was what's most profitable for the wires, they'd be pushing in-house mutual funds, and B shares at that.

 The wires are pushing fee big time, thus the move to six figure minimum acct requirements. 

I really do think those two issues are largely unrelated. Larger accounts, whether in fee or commission based accounts are more profitable and expose the firm to less liability.

Cookie cutter one size fits all, off the rack progams presented as custom tailored pushed on those who don't understand what they're buying.

I'm trying to think of an example of that, and aside from a descretionary mutual fund fee acount, I'm coming up short. Could you provide another example? Also, as to "one size fits all", I really do think the biggest offenders there are guys, usually working as RIAs, that run a portfolio that every client has to own.

Fee based versus commission is a case by case decision. Fee is almost always the better way to go for me. However, it's got to be the best way for the client to go before we'll consider it.

Isn't that what every ethical advisor does? BTW, do you use any SMAs or is this in-house decretionary?

[quote=tjc45][quote=mikebutler222][quote=dude]

Damn tjc, great post.  A breath of fresh air to have someone articulately address the MPT scam that's going on (using it as an excuse to collect asset management fees).........[/quote]

tjc45, is this an even remotely accurate description of what you were saying?

Yes and no. Yes, abused and over sold by wirehouses eager to fee every client up. Especially true of the young sales force that doesn't know its ass from a hole in the ground when it comes to investing and also true of the one size fits all crowd. No, it's not a scam. It's a valid investment theory. However, it doesn't save you from a down market,even though it often advertised by the abusers as being able to do so.

[/quote]

Thank you. 

I had this same argument with scrim in the holding VAs in an IRA thread.  He seems to think that asset allocation is the holy grail and using it will bullet proof a portfolio and a client might not need to, or want to have the extra guarantees of a VA. That last part has nothing to do with the asset allocation/ modern portfolio theory that you guys are discussing. 

I agree with the valid investment theory remark. HOWEVER, I firmly believe that we get paid to manage peoples portfolios in a dynamic world and not to just pigeon hole assets according to a static computer generated module.  Anyone can do that. Who needs us if that is the investment style that is being proposed?

One size does not fit all and the world changes fast. We need to be flexible and offer more than just a cookie cutter asset allocation plan.

[quote=babbling looney]

One size does not fit all and the world changes fast. We need to be flexible and offer more than just a cookie cutter asset allocation plan.

[/quote]

Yeah, but that's so haaaard and, like, really time consuming.  I came into this gig so that I could make a six figure income without working.

I've been doing it like forever, I took my Series 7 way back on the last Halloween and I am getting tired of working.

[quote=mikebutler222][quote=tjc45][quote=mikebutler222][quote=dude]

<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /> 

OTOH, I don't think in my experience (all day, now) that I've seen a "down market" where every asset class is down for any real length of time, and using MPT has ensured that every portfolio has within it those elements that didn’t decline or even grew as other elements declined. My clients in balanced portfolios have seen significant gains in this period of what some people call a "down market".

[/quote]

Mike I respect that your are doing a good job for your clients however your experience is much different than what I'm finding here in the northeast. Over the 01 to mid 03 era I found zero MPT portfolios that weren't suffering. Which goes to the thread topic of a 100% bond portfolio being right or wrong. In theory there is no arguement as to whether a balanced portfolio will outperform a concentrated portfolio in a down market. The problem comes from weighting the portfolio to meet a goal. And the problem occurs when several portions of the allocation are splitting hairs type of allocations. Such as LCG and LCV. Both are large cap and both got whacked. And degrees of whacked doesn't matter to retirees watching their life's savings go down the drain. Most of the allocations, even though advertised as non corelating are only partially non correlating. And in a market like 01-03 or 68-82 partial just isn't good enough. Thus my comment on MPT being unfortunately only a theory. And that being the case or at least my belief based on the experience of what I'm finding out in the world maybe a 100% bond portfolio wouldn't be such a bad thing for an income investor. That being, there is no reliable way to hedge against inflation without putting at least part of the assets on the pass line. And yes bonds have and will perform at X minus from time to time. A non event for a hold to maturity investor.

MPT balanced porfolios for those short of goal is a valid, but not foolproof strategy to attain goal. Mike, your past performance shows are among the minority correctly using this tool.

[quote=babbling looney][quote=tjc45][quote=mikebutler222][quote=dude]

Damn tjc, great post.  A breath of fresh air to have someone articulately address the MPT scam that's going on (using it as an excuse to collect asset management fees).........[/quote]

tjc45, is this an even remotely accurate description of what you were saying?

Yes and no. Yes, abused and over sold by wirehouses eager to fee every client up. Especially true of the young sales force that doesn't know its ass from a hole in the ground when it comes to investing and also true of the one size fits all crowd. No, it's not a scam. It's a valid investment theory. However, it doesn't save you from a down market,even though it often advertised by the abusers as being able to do so.

[/quote]

Thank you. 

I had this same argument with scrim in the holding VAs in an IRA thread.  He seems to think that asset allocation is the holy grail and using it will bullet proof a portfolio and a client might not need to, or want to have the extra guarantees of a VA. That last part has nothing to do with the asset allocation/ modern portfolio theory that you guys are discussing. 

IMHO nothing "bullet proofs" a portfolio ( I haven't seen anyone here suggest that it does), especially if you're willing to cherry-pick beginning and end dates for specific periods and say "see, it went down". OTOH, we're smarter and more reasoned than our clients who would cherry-pick and couple of dates and not examine the entire length of the investment's lifespan. My only point is while a client might "want" a guarantee for his lifetime retirement income we know he doesn't really "need" one, unless "need" means "can't sleep witout despite knowing the facts". Those are the sort of clients I've put in annuities in IRAs, the ones who say "I know Mike, you're right, it's a waste of money, but I can't sleep without it".

I agree with the valid investment theory remark. HOWEVER, I firmly believe that we get paid to manage peoples portfolios in a dynamic world and not to just pigeon hole assets according to a static computer generated module.  Anyone can do that. Who needs us if that is the investment style that is being proposed?

I haven't seen MPT protfolios that are completely static (even if you're unwilling to make tactical moves, the mix changes and becomes more conservative throughout the client's lifetime) nor have I seen any that are invested (remember MPT and AA only give you a mix tailored to a specific client, they don't give you underlying investments) in something you can buy and then ignore. Even the most fire-and-forget portfolios I can think of, ETFs, require manitenance.

One size does not fit all and the world changes fast. We need to be flexible and offer more than just a cookie cutter asset allocation plan.

I'm sure there's a guy selling this cookie-cutter I keep hearing about, but I'm betting his doe it with his favorite three mutual funds and every one of his clients own.

[quote=mikebutler222]

Just my cynical view of the wires that have figured out that fee biz is in their best interest regardless of whether that's true for the clients.

Well, there's no doubt the wires benefit from a stable fee structure over the ebb and flow of a commission based process. There's also the fact that their arbitration costs are lower. OTOH, if the issue was what's most profitable for the wires, they'd be pushing in-house mutual funds, and B shares at that.

B shares are out, too much pressure from the NASD. As are proprietary funds.

Are arb costs down?

Fees are the mantra at the wires. They've taken a consulting process and turned it into a product.

 The wires are pushing fee big time, thus the move to six figure minimum acct requirements. 

I really do think those two issues are largely unrelated. Larger accounts, whether in fee or commission based accounts are more profitable and expose the firm to less liability.

Mike, I don't see the less liability. In fact I see a new layer of liabilty. With SMA accts it goes to the managers losing money in the markets, when they are the world's most elite managers. That the market went down is lost on the main street investor. Especially in cases where the investor was told the manager was good at managing downside risk. And with fee accts, is the fee justified? This is a whole new frontier for the NASD and they are exploring it with zeal.

A large non fee account may not be profitable to the firm. I have a 2 mil bond acct with an ROA of  .36%. I'm sure the firm would be happier at a .75% fee. Yet, I'm not changing a thing. I have many accts like that one. Big low ROA accts with completely unpredictable revenue streams. Good for the client, bad for the company's CFO scratching his head trying to project cash flow. The two, large accts and fees are most definately linked.

To take this another step, a friend of mine who has a 100 million dollar plus muni book recently quit his wirehouse firm under pressure to up his revenue. He was producing about $350K. The same office pressured a 57million dollar asset size broker to quit because she only produced about 100k during the market rout of 01-03. She correctly saw the writting on the wall and moved her mostly equity book into the money market to ride things out. Right thing for the clients, wrong for the firm. They forced her out after several warnings and gave her book to some brokers who had no problem putting the money to work- for the firm that is. 

Cookie cutter one size fits all, off the rack progams presented as custom tailored pushed on those who don't understand what they're buying.

I'm trying to think of an example of that, and aside from a descretionary mutual fund fee acount, I'm coming up short. Could you provide another example? Also, as to "one size fits all", I really do think the biggest offenders there are guys, usually working as RIAs, that run a portfolio that every client has to own.

Mike this is an easy one. The pitch: Mr. Butler we're going to custom tailor a portfolio to meet your goals using our team of world class institutional managers. The reality: The money is split between 3 or 4 managers who co-mingle it with the rest of dough from that particular firm, buying and selling exactly the same stocks at the same time for everyone. As I said "off the rack"

One size fits all and cookie cutter in that everyone gets the same thing. The differences come in the amounts allocated to the various mgrs. This is exactly how it is at SB and UBS. There is nothing custom about it.

There is no difference between an RIA portfolio and a SMA portfolio. The client gets whatever portfolio is being offered with little or no opt out ability.

Fee based versus commission is a case by case decision. Fee is almost always the better way to go for me. However, it's got to be the best way for the client to go before we'll consider it.

Isn't that what every ethical advisor does? BTW, do you use any SMAs or is this in-house decretionary?

[/quote]

No decretionary. I did that years ago with good results, just no need to go that way with my current investment program. We use SMA and fee accts. Some managed MF program, where we  run the show. We were using C shares but we believe that C shares will become the next B share, causing the NASD to spotlight those accts looking for justification. So now we're starting to go with the MF fee program where it makes sense.

Ethical advisor? Where?

[quote=tjc45][quote=mikebutler222][quote=tjc45][quote=mikebutler222][quote=dude]

<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /> 

OTOH, I don't think in my experience (all day, now) that I've seen a "down market" where every asset class is down for any real length of time, and using MPT has ensured that every portfolio has within it those elements that didn’t decline or even grew as other elements declined. My clients in balanced portfolios have seen significant gains in this period of what some people call a "down market".

[/quote]

Mike I respect that your are doing a good job for your clients however your experience is much different than what I'm finding here in the northeast. Over the 01 to mid 03 era I found zero MPT portfolios that weren't suffering.

Well, as I've said, I respect your opinion, but I'm still at a loss to understand how a real MPT portfolio with elments of intl, emrmkts, and FI (and in a retiree's port we're talking a bucketload of FI) were hurting during that time period. If nothing else 2003 was a massive up year even for domestic equities. The only thing I can assume is 1) The portfolio was in mutual funds or SMAs that weren't style-pure regardless of what the name implied, and thus didn't really fill those appropriate pie slices assigned  2) was MPT in name, but really held only domestic, probably large cap stocks, 3) was style pure, but employed the very worst managers on the planet.

In theory there is no arguement as to whether a balanced portfolio will outperform a concentrated portfolio in a down market. The problem comes from weighting the portfolio to meet a goal.

I'm not clear on that last bit. Please explain.

And the problem occurs when several portions of the allocation are splitting hairs type of allocations. Such as LCG and LCV. Both are large cap and both got whacked. And degrees of whacked doesn't matter to retirees watching their life's savings go down the drain.

I would really disagree with you there. I don't think it's splitting hairs and more importantly, when you consider the investment styles involved in selecting each (Buffett's deep value, versus, say, Marsico's momentum growth LC,) the delta in results can be massive. For example, 2001, the Russell 1000G was down 20.42%, while the R1000V was off 5.59%. When you consider there should have been part of that portfolio in R200V (+14.) LBAG (+8.44) the difference between a absolute positive return when hairs were split between the LCs is pretty obvious.

Secondly, even in those very rough years of 2001 and 2002 (2003 was big, big up year) when balanced MPT portfolios lost 4-5% and then 8-9%, I find it hard to call that "down the drain". Down the drain was the guy not using MPT who was in LC and lost 20.42% in 2001 and another 27.88% in 2002. Were there really retirees who were told they'd never have a down year or were positioned in such a way that down 5% and then down 9% killed their retirement?

Most of the allocations, even though advertised as non corelating are only partially non correlating.

Someone is misrepresenting the facts if they're saying their equity components are "non-correlating". That description has to be reserved for AI and the like.

MPT balanced porfolios for those short of goal is a valid, but not foolproof strategy to attain goal.

As soon as they build a "fool-proof plan" nature makes a better fool. Having said that, unless you're dead, it's hard for me to think of a investment aim that isn't "short of a goal". Even those who have enough cash that they make make their required income out of a MM balance are using MPT.

Mike, your past performance shows are among the minority correctly using this tool.

Again, that's not been my experience. I've seen many FAs screw the pooch, but that's been their error, not MPTs. In fact, I can't think of serious money being handled anywhere that's not using MPT as an underpinning.

[/quote]

Again, none of this is meant to take away from your comments about the long term bond portfolio, which in specific circumstances is the right answer.