Every industry has its share of bad apples, and the financial advisory world is no exception. What is interesting is how these “bad apples” get anyone to believe them. Locally, we don’t have to look very far to find examples Denny Hecker, Trevor Cook, and Tom Petters, just to name a few.
Now here is the latest example from Plano, TX. Advisor Kevin G. White set new lows as outlined in the Market Watch column by Al Lewis July 17.
KGW (Mr. White’s firm) claimed that it “raises, invests, and manages private-equity funds, hedge funds, real estate, and other alternative investment vehicles for institutions and high net-worth individuals worldwide.” It boasted running a “$1 billion highly specialized currency hedge fund.” All false, said the SEC in its complaint.
White said his currency-trading fund boasted a 393 percent return since its January 2009 inception. “In fact, the Fund has incurred trading losses of $550,000 plus approximately $1,419,600 in unrealized losses,” the SEC complaint said. White offered an energy fund that promised to triple investors’ money and provide a huge tax savings, as well. He also offered a “$500 million private-equity real-estate fund run by seasoned real-estate veterans who have compiled a 5-year track record that has outperformed almost every major investment index in the world.”
White routinely boasted of a distinguished 25-year career on Wall Street. “In fact, White spent only six years as a licensed securities professional in Houston, before being banned by the New York Stock Exchange,” the SEC said. When Shearson Lehman fired him in 1987, he went to work for E.F. Hutton. Then, Shearson acquired E.F. Hutton a year later and fired him again after a litany of additional customer complaints.
Whenever you are dealing with one of these “ethically challenged” people, you want to keep a simple truth in mind if it sounds too good to be true, it probably is.
A 393 percent return in a few years? A billion dollar hedge fund manager no one has ever heard of and a 5-year track record that’s outperformed everything, are you kidding me?
Also keep in mind that “ethically challenged” can show up in many forms. The agent doesn’t have to steal all your money to be doing you harm; they might just neglect to tell you something important about the product they are selling you. But like my grandmother told me once, a lie of omission is still a lie.
Remember this, a true professional will tell you both the good and the bad about what they are recommending. If your advisor is only telling you the good, it’s probably time to look elsewhere for your financial advice.