And Sometimes They Just Steal From You
One of the dastardly realities of life is that sometimes you can do everything right and the outcome is still dreadfully wrong.
That had to be the feeling of the investors that were allegedly swindled by financial advisor Mark Spangler. Spangler has been accused of diverting more than $56 million of his clients' money into crappy private technology companies of which Spangler was either the one-time CEO or chairman. Spangler made these private company investments despite the fact that he told his clients that he was investing in publicly traded companies.
These kinds of cases normally seem to involve some seedy character that, in retrospect, clients might have reason to kick themselves and grumble, "Why in the world did I trust that guy?" But not so in this case. Spangler was a fee-only financial advisor and a Certified Financial Planner. He was also the former Chairman of the National Association of Personal Financial Advisors, a group that describes itself as "the country's leading professional association of Fee-Only financial advisors -- highly trained professionals who are committed to working in the best interests of those they serve."
In fact, Spangler's CV included many of the traits that we recently highlighted in a Motley Fool special report as attributes to specifically look for in a financial advisor.
But what can investors take away from this in terms of choosing and using a financial advisor? First and foremost, it underscores the importance of clients staying involved in the process -- an issue that we stressed in our report. Still, it's questionable whether that would have helped in this case if Spangler was simply lying outright to his clients.
What it definitely shows is that when you turn over your money to somebody else, you're putting a lot of trust in that person and you leave yourself open to disaster if they deceive you. Investors left nauseated by this thought can certainly manage their finances themselves -- a possibility that the Fool doesn't shy away from.
The incident does, however, put a notch in the column of larger broker/advisor companies like Edward Jones, Charles Schwab (NAS: SCHW) , Raymond James (NYS: RJF) , or even Bank of America's (NYS: BAC) Merrill Lynch. While bad apples can show up in these shops, having a large company on the hook can be comforting.
Maybe an even better solution, though, is considering hourly based, fee-only advisors. These advisors provide clients with all the necessary advice and planning that a client needs, but don't typically hold and manage the client's assets. Getting taken by an (alleged) fraudster like Mark Spangler is much tougher if you never turn over your money in the first place.
At the time this article was published The Motley Fool owns shares of Bank of America. Motley Fool newsletter services have recommended buying shares of Charles Schwab. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.Fool contributor Matt Koppenheffer owns shares of Bank of America, but does not have a financial interest in any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.