The following were in response to Dan Richards’ article, The Surprising Number One Driver of New Clients, which appeared April 22:
Dear Editor,
Unlike so many marketing articles I read, this article was concrete, insightful and doable from an implementation standpoint.
I am currently working with an advisor who has a very tightly defined niche market with (primarily) families in business. His concentration is in the behavioral wealth management/values-based realm, which is often difficult to explain to potential clients quickly. He already writes articles and we are having a meeting today on the very subjects in your article – I can’t wait to share your very succinct methodology.
Thank you,
Deanna Kuder
Marketing Director
Bridgewater Wealth
Wexford, PA
Dear Editor,
Thank you for sharing your insight this week on the research supporting “advisor reputation” as the number one driver of new client engagements – along with several practical approaches to building one’s local reputation.
Somehow as I read your article, my mind flashed back (way back) to a 1970s episode of Happy Days. Richie was preparing for a showdown or fight with a known tough guy from the neighborhood. He went to The Fonz for some help and The Fonz proceeded to give him many lessons on how to be tough and cool. When the moment of the showdown arrived, Richie did everything according to the Fonz’s direction, but to his frantic surprise, it didn’t work. Richie runs over to The Fonz and says, “how come it’s not working,” to which The Fonz replied, “I forgot to tell you – you need a reputation for the rest of it to work.”
Funny how the fundamentals transcend generations!
Kind regards,
Monte I. Resnick
Managing Director
Camden Capital
North Palm Beach, FL
The following is in response to Gary Halbert’s commentary, Dependence On Government Has Become Epidemic, which appeared on April 30:
Dear Editor,
Has Mr. Halbert compared these numbers to the subsidies – the welfare – that go to corporations? The oil-depletion allowance, trucking and airline subsidies, corporate-farm subsidies, bailouts of financial institutions, cost-plus contracts for suppliers to government, tax-favored bonds for such as WalMart, targeted tax breaks for real estate “developers,” training by our military for private contractors’ employees (“Get in. Get trained. Get out. Get paid.”), legislation that permits operations that dump toxic substances into our water and air, or costs that should be charged to the final users of these goods and service? If not, the free market cannot produce the efficiency that is its chief justification.
Helen Hill Updike, Ph.D
Partner
Bridgewater Advisors, Inc.
New York, NY
The following is in response to Larry Siegel’s article, Tempest in a Teapot: Michael Lewis' Flash Boys Solves a Problem that is Barely There, which appeared last week:
Dear Editor,
I take exception to this article. I have written about the subject before (see here) but Siegel’s commentary needs a specific answer. Here is my rebuttal:
Siegel’s criticism of Michael Lewis’ book The Flash Boys is wrong for two reasons:
- It misses the point of the book.
- It runs against the fundamental reasons that make U.S. markets the largest and most liquid in the world.
Specifically:
- Those who actually read The Flash Boys will be guided to conclude that the main problem does not reside with ultra-fast technology, but with how exchanges and dark pools have implemented a system that favor HFTs at the expense of regular investors (and get paid handsomely in the process).
Exchanges, for example, have complex rules for rebates that apply only to HFT firms. By Lewis’ account, exchanges have also come up with dozens of orders types that only make sense to HFTs. These orders go well beyond the well-known stop, market or limit orders. They are specifically designed to prevent or limit execution and allow HFTs to cut in line.
There was, for example, the infamous “hide not slide” order, which in 2012 – two years before Lewis’ book – was reported by the WSJ as an example of how HFTs can place orders that are hidden and then allow HFTs to jump ahead of other investors who placed orders first. The book also shows how HFT firms have access to the internal mechanisms of dark pools to the detriment of non-HFT investors, who do not.
By focusing on defending the technology, Siegel misses the entire point of the book.
- Siegel asserts: “if you want to see a rigged market that actually hurts, look at your savings account. You’ve been earning zero, while inflation is proceeding at 2% to 3% … Which tax should we be more concerned about: a trading tax amounting to a basis point or two at most, which is avoidable if you don’t trade, or a savings tax of 2% to 3% every year …?”
This is a very obfuscating line of reasoning. First of all, HFT profits and interest-rate differentials are not “taxes,” and the fact that savings rates are below inflation is not an example of a “rigged” market in the same way that HFT front-running is.
Sadly, Siegel is not the first one to argue along the lines that while HFTs systematically cut in line, damage to the individual investor is too small to matter. Basically, he tells us that we should all stop complaining and let HFT firms do their thing because they may be bringing other benefits to the table (like businesses who pollute, he explains).
This bizarre argument ignores that the U.S. markets are the most liquid and deep in the world precisely because everyone trusts that they are fair. That’s one of the reasons why regulators take insider trading so seriously – letting people trade with unfair advantages makes the whole point of a fair market evaporate. Similarly, letting HFTs and exchanges get away with front-running, however small the damage caused, chips away at the trust placed in U.S. capital markets.
Here is another way of looking at this: If someone could figure out a way to take a dime from every single man, woman and child in the US per year, s/he would make in excess of $30,000,000 per year. Nobody would even notice that they are missing a dime. But can we argue that society is better off when this money is invested (or spent) because resources that would have otherwise been idle are channeled productively? Following Mr. Siegel’s argument, the answer is yes. But it is a crime all the same.
Some will argue that neither HFT firms nor exchanges are committing any crime because they are not in contravention of any law or regulation. This is no accident: lobbying helps. And thanks to so many who reflexively oppose regulation even when there is a screaming need for it , this state of affairs is likely to remain that way.
Comments like Siegel’s are far from benign. They ignore the importance of trust in U.S. markets and fail to appreciate the damage that current practices can extract on a system that took a century to earn its reputation. Far from being a “tempest in a teapot” Michael Lewis’ report should be hailed as a great discussion of the hidden ills that corrupt the functioning of U.S. markets.
Raul Elizalde
President
Path Financial LLC
Sarasota, FL
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