Connect with us


Keeping Your Money Safe from Shady Advisors



Don’t be stunned when I tell you this. But, you can’t trust every financial advisor out there. I mean there really are people out there like Matthew McConaughey’s character in “The Wolf of Wall Street” conducting some really dirty business.

Due – Due

In fact, according to one study, 7.3% of financial advisors in the United States have been cited for abuse. If you dig deeper into the data, though, one in 12 financial advisors in the U.S. has been cited for misconduct.

”These things are not frivolous,” Mark Egan, an assistant professor of finance at Harvard Business School and a co-author of the study, told Forbes. “The average settlement is in excess of $100,000 and the median is $40,000. These are costly offenses.”

Unbelievable, right? The last thing that you would expect is that a financial advisor would embezzle money or get you wrapped up in a Ponzi Scheme. But, as far as I’m concerned, most of these financial planners are doing a good job. Not an amazing job. But, a decent enough job where they’re not scamming their clients.

So, how can you find a trustworthy advisor from one who doesn’t have your best interest at heart? Or, even worse, are straight-ups stealing from you?

The Fiduciary Duty

First things first. Let’s talk about fiduciary duty.

“All financial advisors are held to a standard of care when dealing with investors,” explains Robert Pearce, P.A. “Registered financial advisors have a higher fiduciary duty to their clients under the Investment Advisers Act of 1940.”

The highest level of care must be provided by financial advisors, including making appropriate investments and providing relevant information to their clients.

“Knowing whether your financial advisor is registered with the U.S. Securities and Exchange Commission (SEC) or a state securities regulator is important because if the advisor breaches the fiduciary duty, you can bring a claim against the financial advisor through the Financial Industry Regulatory Authority (FINRA),” adds.

The FINRA regulates advisors and their firms and assists advisors and investors to settle disputes.

What’s Their Planning Approach

Moving on, here’s one glaring red flag to be on the lookout for.

Imagine, for instance, that they make a recommendation to change something in your portfolio. But, you don’t fully understand it. Are they doing so because they genuinely want you to increase your earning potential or decrease your risk level or diversify more? Or, is it because it will help them line their pockets more — which obviously doesn’t benefit you.

While it’s only fair that both you and the advisor make money, you don’t want this to happen at your expense.

Here’s a real-life example. Some time ago, we had some friends who knew that I was a financial planner and they wanted my opinion on something their financial planner had recommended.

Basically what this advisor was telling them was that they should take the majority of their current investments which were mutual funds, and we’ll talk more about which kind of funds they should take as that is very important to the story.

In other words, they were suggesting moving their mutual fund portfolio into a more managed portfolio. As I mentioned before, I’ve already been around the block a few times, so I get the feeling that when they say managed, they’re going to charge more.

I would advise you to be cautious of a financial planner’s suggestions. If they make the suggestion of changing or putting together a portfolio using the word managed or managed, that means there is going to be a fee associated with it.

Why’s that a big deal?

Having something that is managed properly isn’t necessarily a bad thing, In this case, though, the clients of the advisor were investing with a mutual fund portfolio managed by American Funds.

Mutual Funds
Mutual Funds

As you can see, this is just a mutual fund company. American Funds is one of several mutual fund companies that exist. So, essentially, this is like a Vanguard or a Fidelity.

It’s worth mentioning that the Americans Fund family is a mutual fund company suggested by a lot of financial advisors for commissions. Not to pick on Edward Jones, for example. But anytime I looked at Edward Jones’ statement from anybody, they had American Funds. They’re not a bad company, just a decent one.

Why do I say that? Well, when the bear market hit in 2001 and 2002, they did well. But, fast forward to 2008 and they didn’t hold up as people began selling their American Fund. But, this is what my friends had.

A Thing Called Prospectus

This is one of their main products, mutual funds and this is what my friends had. Now with any mutual fund that you buy, there is this thing called a prospectus.

When you buy a mutual fund or ETF you will get a little white booklet that contains everything that you have to know and don’t have to worry about. They do this to prevent you from taking legal action against them if you lose money. Bottom line.

In other words, you get a prospectus. Typically, your advisor should mail you one. And then you will receive one every year or whenever there are updates.

As part of my training on how to sell mutual funds, this was one of the things that we actually used. So I guess I ought to put this out there, I am basically bashing and criticizing other people who are selling A-shares. By bashing, I mean pointing out that these are advisors who are making commissions.

To clarify, I was trained in the way I sell mutual funds and in particular, A shares, from the moment I entered the business. As a mutual fund salesman, I have always been taught to sell front-loaded funds. As part of the prospectors, the client was shown how much they should expect to pay as well as what the costs were.

The A-shares are the mutual funds where you can buy different share classes of the fund. It is common for people to buy A shares or to sell them to their clients through their financial advisors, and I’m going to share with you how it works, how much they pay, and even more specifically, how much they pay that my friends pay to purchase their A-shares from American Funds.

So let’s take a closer look at a real-life prospectus.

Here’s an excerpt from American Funds Capital Group’s website. I assume that this is the prospectus for The Growth Fund of America — at the time this was their largest mutual fund.

Prospectus example
Prospectus example

I’ll be honest. You don’t read all 81-pages of this. It’s so boring with a capital B. But for those of you who love the details and want to learn more about investing with mutual funds, this booklet can help you achieve that.

To save you some time, however, the two most important things for you to be aware of are the A and C-shares. My friends purchased A-share. This is the most common type of share class to invest in if the stock and it’s usually for longer than five years.

In the prospectus, you can see that there will be a load of 5.75% of whatever you invest. You will subtract $575 from $10,000 if you have to invest. In case you’re interested, the advisor gets paid 5% of the load, with the mutual fund company getting paid 0.75%. So if I sold you a mutual fund for $10,000, I would get paid 500 dollars.

How Does an Advisor Get Paid

Although you’re paying now, over time you will be recouping those costs. With a C-share, you wouldn’t be paying anything upfront. However, you would pay an annual fee of 1%. Since this 1% is on an ongoing basis, you’ll end up paying more in the end.

However, there is an additional fee with the A-share payment. It’s called the 12b-1 fee and it’s the 0.25% that you pay on an ongoing basis. In addition to this, there is a management fee.

So you have management fees, distribution fees, and other expenses. So total operating expenses are 0.64, versus the 1.39 with the C-share. This is where all of these fees play into the equation.

In this case, we have an A-share, where we pay a front-end load, 5.75%, and a C share, where we do not pay anything upfront. But, then we pay a 1% ongoing fee to the advisor, in addition to management expenses.

In regards to A versus C, if you are an advisor and this is something people are saving for retirement, then the A-share seems more logical. How come? When you pay upfront instead of ongoing, it’ll cost a lot more with a C-share

Also, there’s another difference with mutual fund companies. Let’s say that you invest more than a certain amount. So if you have less than $25,000 you will pay that 5.75 percent. Consequently, if you invest between $25,000 to $50,000 with the American Funds, then you get a discount. In that case, instead of paying a front-load of 5.75%, you’ll only have to pay 5%.

Here’s why this is slightly suspect.

The advisor most likely sold these A shares on the idea that the A-shares are a more cost-effective option. Again, you’re paying upfront. And you’re probably getting a discount for how much you are putting into the American Funds. That’s going to be much less expensive than owning the C shares that have ongoing costs.

His proposal was to eliminate American Funds and switch this to a managed portfolio. However, a managed portfolio means paying a higher fee.

So, why would the advisor make this recommendation?

First, the advisor was selling his clients on the benefits of diversification. How so? Well, a portfolio consisting of mutual funds means that you would own a basket of funds. You will now have 12 to 15 different mutual funds, instead of 5 or 6.

Here’s where I become really suspicious.

His next statement was, “I just don’t have the time right now to manage this portfolio.” But, why would he say that?

What this advisor is basically saying is that “I am too busy to manage your portfolio.” As a result, I have not been managing your portfolio since I sold it.

That’s a problem because now he is saying that you should switch to the managed portfolio because he doesn’t have the time anymore. That’s in addition to an upfront fee that’s probably between 2 ½% and 3 ½% on a continuous basis. And, there are also annual management expenses, which are like 0.65% per year.

As a result, moving to a more diversified mutual fund portfolio means more management expenses.

It’s because of this that this is borderline shady. The advisor must assess your management fee whenever you move to a managed portfolio? Oftentimes, you will hear about fees-based, fee-based advisors. The fees they charge are based on the assets they manage.

If they stuck with the first portfolio, they got paid upfront. After that, they got paid 0.6 and then they got paid 0.25% ongoing. But, let’s say under portfolio two the advisor charges a 1% management fee. it does not include the 0.65%. So you, the client, would have to pay for the entire year 1.65% of the total portfolio value.

A 1.65% fee would be required in year two. Year three, nothing changes. And this is where the advisor is making more in the long run. Now they’re making 1% instead of 0.25%.

That’s a lot of math there. Long story short, though, the advisor has reached a point where they want to increase the fees they’re generating on a reoccurring basis.

To be transparent, however, the advisor would have to report if they’re making more money. But, maybe if you transferred firms, you might get around this.

Final Words of Advice

Even though financial advisors have to disclose this information, they can still sell their clients on diversification. Nothing wrong with having a diversified portfolio. But, in this scenario, the client paid a hefty upfront fee on their original portfolio. Then, 3 or 4 years later, the advisor suggested that they much to a more diversified portfolio. Now, there’s a larger ongoing fee and everything’s being managed by a third party.

So, before getting talked into this, ask the advisor what’s really going on here. If they are acting fishy, consult another expert. Or, go to FINRA BrokerCheck and file a report. That sounds excessive. But, they’re trying to double-dip by making a big fat commission check on the back of the front end while making more on the back end. And, that’s totally not okay.

The post Keeping Your Money Safe from Shady Advisors appeared first on Due.


Down rounds are still rare by historical standards • TechCrunch



If you thought that the recent venture capital market was tough, let me tell you about 2016, 2017, 2018, 2019 and 2020.

With the first week of December under our belts, we’re not too far away from the end of the year. And that means that 2022’s venture capital story has largely been written. It’s not a single narrative; instead, this year started on a high, with momentum from the monstrous 2021 funding period persisting into the new year. From that point, we’ve seen a slowdown accelerate into what some consider a downturn.

The Exchange explores startups, markets and money.

Read it every morning on TechCrunch+ or get The Exchange newsletter every Saturday.

Startups raised lots of capital this year. Less, yes, than last year, but more than in nearly any year in recent memory. It’s still a good time to build a tech upstart.

Does that perspective feel too sunny when we hear so much doom and gloom on Twitter regarding startup prospects in a more conservative investing climate?

Source link

Continue Reading


Howie Mandel gets a digital twin from DeepBrain AI



Howie Mandel is stepping into the metaverse. DeepBrain AI has created a pretty realistic AI version of comedian and actor Mandel.

Deepbrain AI, based in South Korea and Palo Alto, California, calls its creation “AI Howie,” and it’s an interactive virtual human and digital twin for immersive and personalized fan experiences. AI Howie mentions VentureBeat and talks to me in the attached videos.

Unlike the “deepfakes” of Tom Cruise and other actors, the real Howie Mandel cooperated with DeepBrain AI to create the virtual human AI replica of the famous comedian, actor, host, and technology enthusiast. We used “virtual Paris” AI character at our recent MetaBeat event in San Francisco.

“I am equally thrilled, excited, and terrified to finally have the ability of showing up and doing things without going anywhere or doing anything,” said Mandel, in a statement. “Thank you, DeepBrain.”

DeepBrain AI applies deep learning technology to create hyper-realistic virtual humans through its AI Studios and the AI Human platforms. These virtual humans are digital twins of the real person, with the same appearance, voice, gestures, and subtle mannerisms. The AI Studios platform enables script-to-video software that synthesizes dynamic video content in seconds, producing the quickest and most
realistic AI-generated videos. The script-to-video editor makes it easy for customers to select a model and then make it say something based on a script. Within a minute or so the video is made.

This is a powerful communication and marketing tool for celebrities, professional athletes, news anchors, and even politicians. Before working with Howie Mandel, the DeepBrain AI team created digital twins of Premier League soccer superstar Son Heung-Min, multiple news anchors across Asia, and South Korean president Yoon Suk-yeol.

Joe Murphy, business development manager for DeepBrain AI, said in an interview with VentureBeat that the virtual Howie is a conversational model that you pepper with questions. DeepBrain AI designs and develops these virtual humans for the purpose of creating digital twins (like Howie Mandel), digital people, and avatars.

It takes about four weeks of machine learning work to create a Howie Mandel digital twin.

“We create models of real people,” Murphy said. “We also have completely synthetic virtual humans. That is what we’ll call digital people. And then avatars are just the basic Roblox type of avatars. But where our technology comes in with the digital twins is we go through a deep learning process to clone the person’s voice, their mannerisms, their face, the way their eyes move, the way their lips move.”

He added, “So we create what we call the digital twin of the real person with all the uniqueness of that person. Our mission is to use this technology that we’ve developed throughout Asia and bring it to America.”

In addition to the script-to-video capabilities, the company provides fully conversational experiences with its AI Human software. The AI Human solution enables fans to interact and engage with AI Howie by simply asking questions. For example, when asked, “What was your favorite act on AGT this season?” the AI Howie model responds in real-time to support interactive, fun, and engaging fan experiences.

AI Humans are available within mobile apps, web browsers, or voice-activated kiosks.

“Our vision is to humanize digital experiences and empower creative teams to generate immersive content at scale,” said Eric Jang, DeepBrain AI CEO. “Working with Howie Mandel was a fun experience, and we are excited to see how the AI Howie collaboration will connect with his fans worldwide.”

DeepBrain AI, (formerly Moneybrain), a conversational AI startup based in Seoul, South Korea, has raised $44 million in a series B round led by Korea Development Bank at a post-money valuation of $180 million. The company started in 2016 and it has raised $54 million to date. The company has 130 employees.

The AI is being used for AI news anchors in South Korea and China at four different television networks. The networks flag that the anchor is an AI avatar so that no one gets confused.

The real Howie Mandel spent about a day shooting video with DeepBrain AI.

While multiple companies are working on virtual humans, DeepBrain AI’s avatars are hyperrealistic. One of Asia’s largest insurance companies is also using it, as is a “brand ambassador” for a soccer team.

“When we worked with Howie Mandel, we went down to his studio in Los Angeles, we provided a script, and fed our training data into our neural network,” Murphy said.

It took about a day to do a video shoot with Mandel and about three to four weeks of machine learning time on the computers to generate the first AI model.

Back in January, DeepBrain AI opened its office in Palo Alto, California, and it is talking to partners in Silicon Valley and the rest of the U.S. Over time, Murphy said that the hope is to create AI avatars in realistic 3D for the metaverse. In South Korea, kiosks are appearing in places like banks with both 2D avatars and 3D avatars.

Over time, Murphy said the avatars have gotten better at mannerisms, lip sync, and subtle gestures. The speed of real-time responses in conversations has also gotten faster. The company is talking about doing more with game companies and major brands.

Source link

Continue Reading


This Doggy DNA Test Ships Free for the Holidays



Opinions expressed by Entrepreneur contributors are their own.

Every pet owner wants the best for their animal sidekick. They want to spend as much time as possible with them, even at the office. But being the best dog owner you can be isn’t all about just being present. It helps to understand your dog on a genotypic as well as phenotypic level. That’s one reason why doggy DNA tests have become so popular.

DNA My Dog

If you’re wondering what to get for your pooch this holiday season, look no further than the DNA My Dog Breed Identification Test. If you order by December 8, you’ll get free shipping, but that date is coming up fast so don’t delay.

This simple, painless kit requires just a swab of your dog’s cheek to get a detailed report delivered in two weeks or less. That report includes a custom photo certificate of the breed breakdown found in your dog’s genetic breed composition, a percentage breakdown of the levels found in your dog’s DNA, and a report on the dominant breeds, personality traits, and health concerns that your dog may be genetically predisposed to. All of that information will help you be a better friend to your dog, making smarter decisions about food, training, and healthcare.

The DNA My Dog Kit was awarded at the 2020 GHO Biotechnology Awards and user Bonnie H. writes, “I loved this experience!!! The kit came immediately with great instructions. The results came exactly when promised. When I couldn’t open the attachment with the results, I emailed my concern and got instant help! To find out his DNA has been the coolest experience!”

Lock in free shipping on a unique gift for your dog by December 8. Grab the DNA My Dog Breed Identification Test on sale for 24% off $79 at just $59.99 now.

Prices subject to change.

Continue Reading