I want to briefly touch on the subject of broker dealers (especially publically traded firms) as they relate to our private, family registered investment-advisory firm. I started our money management business over two decades ago in response to years of requests from my strategy report readers for such assistance. Back then, I was still researching and writing every word of Young’s World Money Forecast. YWMF was a 50-page monthly monetary and economics report for institutions and corporate financial officers, I was kept busy. I could only work with a handful of clients. As time passed and it became clear that the number of individuals looking for help exceeded my ability to provide assistance, I decided to expand to a family firm that would be run by my son, Matt, and eventually would include other family members. Having been with Wall Street firms for 14 years, I wanted nothing to do with the broker-dealer crowd and its compromised research. I would pay what was required to have all of our research in house.
The broker-dealer game is all about in-house trading desks and distributing securities. Research is mostly intended as a tool for the investment banking side of the business as a means of capturing commissions from institutional accounts. A side business includes solicitation of private clients, either as brokerage accounts or investment management accounts. Broker dealers profit from charging management fees and, more importantly, from offloading underwriting-stocks and bonds on retail accounts. The big institutions have huge power. As such, the institutions, knowing they hold all of the cards, demand any good new offering or secondary offering. No way prime offerings ever see the light of day for any retail account. Retail accounts, whether brokerage or advisory accounts, have no leverage against billion dollar institutions.
I was involved with every aspect of retail and institutional sales, as well as of research and trading. I dealt with the biggest institutions in the world on a daily basis. Wall Street is much like Las Vegas in that the deck is always stacked against the customer, who never sees the inside mechanics. When I started our investment management firm, I wanted nothing to do with the Street and continue on the same course today. My goal is to provide our conservative small business owner and retired clients with Tiffany-like service in an uncompromised setting. Unlike when dealing with broker dealer organizations, our clients are free of the conflicting self-interests. We do not engage in underwriting and securities distribution. We do not have investment banking clients. We do no proprietary trading. We use an outside, strictly independent custodian and trading desk. In other words, we avoid, on behalf of our private clients, all conflicting self-interest. We do not sell our research, provide our research to others, or use our research as a marketing tool for investment banking clients. Our clients deal with family members and in fact are thought of as family in terms of the close personal relationships developed. Our only compensation from clients is in the form of modest management fees. In sum, at Richard C.Young & Co. Ltd. our client’s best interest is our only business.
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