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Source: Mailed invitation
Location: Ristorante Bonaroti, Vienna, VA
Sponsor: Clark and Associates, Inc.
Topic: “Practical Retirement Strategies.” This included allocation, safety, ROI, mutual-fund fees, life insurance, & LTC.
Speaker: Richard H. Clark
Credentials, Brokers, Associations, Endorsements: None mentioned
Immediate pressure: None
Appointments: Guests were encouraged to make an appointment. Many did.
Information Requested: Guests were encouraged to bring a list of current mutual-fund holdings to their follow-up appointment.
Rate of Return: 3.5% used as an example in the PowerPoint slides. No specific rates were ever tied to specific products.
Investments Discussed: Annuities, life insurance, and LTC were discussed in a very superficial manner. No discussion of advantages/disadvantages, fees, or risks. Guests were not encouraged to buy such products.
Phrases emphasized: Safety and reasonable rates of return.
Meal: Pre-buttered bread, pre-dressed salad, cream coved main dish (entrée, vegetables, and starch), and whipped-crème dessert.
Warm-up discussion for 10 minutes by Kathryn: The session was described as a learning exercise for the guests. The warm-up speaker said the hosts were not selling anything. Kathryn made an analogy of a building as a suitable structure for one’s investments, with the foundation being risk-free assets. The roof could be determined by a formula: 100 – age. A 55-year-old might put 45% of investments at risk as the “roof,” but keep the remainder, 55%, in risk-free investments as the foundation. A 60-year-old might put 40% at risk and 60% in risk-free investments. Safety should be the primary goal, since most people would shun an investment that might return 2x or 1/2x the initial capital. People aren’t willing to accept a loss of ½ their capital. Diversification is not the answer to safety; asset preservation is the answer. Annuities can be considered do-it-yourself pensions. Investments should be kept simple.
Main discussion for 44 minutes by Richard Clark: The foundation of the financial world is gone. Historic firms like AIG and Lehman Brothers have fallen, and more titans will fall in the near future. Mr. Clark’s clients avoid fees and taxes. He has one client who has never lost money in 18 years. He has another client who had his money in brick-and-mortar banks but Mr. Clark recommended moving the cash to an online bank for a much higher interest rate. Mutual funds have returned about 5 – 7% per year over the last 10 years; however, most returns are negative this year. Mutual funds charge acquisition fees (5.75% purchase fee for A shares and 6% sales charge for B shares), management fees, and 12(b) fees (about 0.25% for A shares and 1% for B shares). If mutual funds are purchased through a wealth manager, there is usually another 1%/year for that manager. Clients can take their life insurance’s cash value and buy a single-premium annuity that will pay out until age 110. Their life insurance’s cash is a tax-free loan. The disadvantage of the loan and annuity is that there is no death benefit for heirs. Long-term-care insurance can take care of the risk of future nursing-home costs. Mr. Clark says his role is to fill the holes in his clients’ financial buckets, so their wealth does not drain out. He emphasizes safety and reasonable rates of return. [DJIA closed at 10,854 on 9/23/2008.] He encourages clients to visit him for about an hour for a complimentary review of their mutual funds’ fees and net returns.
The welcoming package from Clark & Associates, Inc. arrived at my house on 9/25/2008 (two days after the free dinner). The package consisted of the following four items: (1) A welcoming letter asking me to bring financial statements and trust agreements to a first meeting, (2) A confidentiality agreement (ie, none of my financial information would be shared), (3) Directions for getting to their office, and (4) A 6-page questionaire seeking exhaustive information about my financial situation. There was nothing in the package giving any clue as to the past performance of Clark & Associates. The letter's footer did state that Clark & Associates offers securities through Woodstock Financial Group (nb: this Woodstock is in GA, not the famous site in NY or the small town in VA).