From the August 2007 issue of Investment Advisor • Subscribe!

Statement Doesn't Carry Water

In "The Carry Trade," (HedgeWorld, June 2007) you quote Erik Postniecks stating that "Ninety percent of all retail investors lose money in futures markets."

I assure you, there has never been a survey taken or published to substantiate this urban myth. If 90% of retail futures investors really lost money, do you actually think there would continue to be retail futures investors?

I am an investment advisor and a CTA with 30 years of "C" level experience in the futures industry and whether I employ equities or futures for client investment needs quite simply depends on the client. Futures are legitimate investment tools, and it's tiresome to see them slammed as an asset class without regard to their proper application in wealth management strategies.

Scott Eisner

Managing Member

Scalar Funds Management

Buffalo Grove, Illinois

Bob, You're So Wrong

After reading Bob Clark's June 2007 article ("The Art of the Deal"), I felt compelled to point out a number of inaccuracies in this and many of his previous articles on selling your practice.

In his cash-flow comparison of selling to a roll-up firm like NFP, he fails to note that the purchase money received up front is taxed at lower capital gain rates. He also fails to take into account that the up-front money can be invested and will grow over time.

While mentioning that NFP stock has performed exceptionally well, he totally discounts the appreciation potential of the stock part of a transaction. He seems to miss the point that one of the primary benefits that a roll-up firm offers is the ability for all of the participating firms to leverage the much higher valuations for public companies. This can be especially attractive with early stage roll-up firms like Focus Financial Partners.

When one takes into account the proceeds from selling a portion of your future cash-flow for an up-front payment on a tax-advantaged basis, plus the earn-outs that provide additional compensation based on firm growth, plus the benefit of getting public company valuations for your private company, these transactions can result in multiples far in excess of the 14 times free cash flow quoted by Bob Clark. These deals are also not pie-in-the-sky, but have already taken place successfully. They are very transparent deals where everyone can see how everyone makes their money, not a "Byzantine deal structure" or an undefined piece-by-piece sale to younger advisors that Bob Clark seems to be promoting.

Bob Kresek

Managing Partner

Founders Financial Network

Cupertino, California

Bob, You're So Right

Do you have any case law with successful precedent on chowderhead litigation? ("We Win, Sort Of," Clark at Large, May 2007) I think you may have hit this one square in the mouth...suing the CFP Board for negligence (neglect of licensee), lack of suitability (verging on non-existent), and the ever-present lack of fiduciary (inconsistent at best).

What a concept.

Might just be the time to vote with my renewal fee for that value-diminished mark. I've given up on figuring out what I am: a/an certificant, designee, practitioner, licensee, professional, registrant, trademarkee, etc.

Chowderheads...I still like that.

John S. Longstaff, CFP

Beechwood Advisory Group

Fresno, California

Reprints Discuss this story
This is where the comments go.