1200 Eastover Drive
Jackson, MS 39211
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“The most important thing in life is to stop saying 'I wish' and start saying 'I will.' Consider nothing impossible, then treat possibilities as probabilities.”
— Charles Dickens, David Copperfield
Avarice has ruined more souls than extravagance
– Charles Caleb Colton
Born in 1780, Charles Colton was best known as an English writer, with his most notable quote being, “Imitation is the sincerest of flattery.” Unfortunately, we doubt you would want to imitate Charles’ life, for while he was successful to a point, even owning an art gallery and a respected art collection, gambling would eventually deplete his entire net worth. He ended his life, literally, having had to rely on the charity of his family in his last years.
This letter takes a different tone from most. As we have said in the past, we typically write when we have something to say. Today, this concerns our client responsibility and fees. Over the last several years, there has been much conversation in the financial industry about the government imposing a fiduciary rule on all persons who hold themselves out as a financial adviser. Proposed by the Department of Labor (DOL), this fiduciary rule was regulation requiring financial advisers to work in a client’s best interest. It was to have begun a phased-in implementation in 2017 and be fully effective January 1, 2018. Regardless of how a financial adviser massages his or her title, the rule would apply to investment managers, brokers, planners, and even insurance agents because of their potential to add company sponsored mutual funds and annuity contracts to their stable of offerings, which often results in high fees.
The measure met significant resistance from brokerage firms, but also, oddly enough, the likes of Vanguard and Blackrock. In all, the DOL received about 193,000 comment letters, with almost 178,000 opposing any delay. Nevertheless, it was delayed. Today, the fiduciary rule is expected to be adopted this fall. We fully support the fiduciary rule because it elevates professional integrity beyond where it currently stands. You are the reason we do what we do and are honored and privileged by your trust and business. We strive to uphold your interests first and foremost, which we desire for anyone seeking assistance with their wealth.
What prompted this letter were two recent Wall Street Journal articles. One, from last week, concerned an adviser who received $500,000 from a client who named him as beneficiary of her variable annuity contract a few months before she died at the age of 78. The Maryland state investigator concluded the adviser acted unethically and violated state law. Too, the adviser’s firm was not registered to conduct business in the state, which was another violation. The self-regulatory body criticized the adviser’s conduct, but sadly didn’t rule against him. Ultimately, in a manner that likely ends up in court, it was the state investigator who was fired, not the adviser.
Another article last month made the front page titled “Firms to Repay Clients $125 Million.” The number of firms mentioned as cooperating with the Securities Exchange Commission was 79. The total investment among an unknown number of clients was not given, but needless to say, was in the billions of dollars. The premise was advisers pushed clients into higher-cost
mutual funds without being told cheaper versions of the same fund were available. From the SEC’s website, more than a handful of these firms operate in Mississippi, including the Jackson metropolitan area, but no specific adviser was mentioned.
Because a client pays two fees, one to the adviser and one to the mutual fund, we prefer not to invest in mutual funds, though, we occasionally will when we see merit. That said, we only invest client assets in institutional class shares, when available, which are always the lowest cost share class. Also, we never have, nor will, accept a 12b-1 fee, or any other form of compensation from any mutual fund company. We believe such actions constitute a conflict of interest and are not in your best interest.
While on this subject, we’ll also mention our fee structure. If a firm exceeds $100 million in assets, which Mississippi Investment Management (MIMCO) does, it is required by the SEC to provide new clients a Brochure, which is a disclosure outlining a firm’s business practices, conflicts of interest and background, among other things. Enclosed with this letter is MIMCO’s most recent filing as of March 31, 2019. A fee schedule is part of a Brochure’s disclosure. From this, the most MIMCO will charge anyone is one percent of managed assets. The rate had been 1.25 percent, but we lowered that a few years ago. One percent is typical in the industry, but there are firms, including those in the Jackson metropolitan area, that charge higher. One firm we’re aware of allows fees of up to 2.50 percent, which we find usurious.
There will be firms that charge less than we do, but I suspect they don’t follow markets as we do, and especially the specifics of individual stocks and bonds. We’re thankful for the experience 38 years in the investment industry has provided and even more so the ability to share it with you. We will not always get it right, but one thing we will always do is place your interests first. This is why, in part, I believe we were named as one of Mississippi’s best wealth advisors for the second straight year, according to Forbes, Inc. and Shook Research.
Thank you for the privilege of serving you.Back to top