Don't Get Fooled in School - Part 2

Last week I focused on a single “continuing education” class on “investing” being taught at community colleges across the country. As I continued to research the investment classes being offered to the public through adult education programs, I found that most are not as ambitious as the previously profiled instructors. What I did find, almost universally, is that these classes are being taught by stockbrokers and insurance agents.

While I randomly looked at various classes around the country, I decided to focus my efforts on schools where most of our readers reside, the Puget Sound area. My search for classes was totally random using nothing more than Google.

I researched investing classes at five different community colleges. In one case, the class was being taught by a gentleman who sold insurance products for a living. You can bet that he sang the praises of high commission products such as indexed annuities, variable annuities, and other products designed to make those who sell them wealthier than those who buy them.

One class was conducted by a man who worked for a registered investment advisor that charged annual fees as high as 2% per year. He also had the ability to sell loaded funds and expensive insurance products.

I was surprised to find that two of the five classes were being conducted by Edward Jones brokers. Perhaps they have a training program that encourages lifelong learning classes as a valuable prospecting tool. From my experience, Ed Jones “financial advisors” tend to be small operators that are desperate enough for commissions to sell clients and prospects on those products that deliver the biggest bang to the broker for the client’s buck.

The last school that came up in my random Google search was Seattle Central Community College. There I found a class entitled “Investing for Retirement, Money, Math & Behavior” being taught by Lauren Vignec. I finally discovered a good one. Mr. Vignec co-authored “The Bogleheads’ Guide to Retirement Planning.” A Boglehead (a proponent of low-fee, passive, well-diversified investing) teaching an investing class? 

After reading through the syllabus, I was impressed. This class looks like it provides a solid, “real” investing education. The only minor problem is the fact that the firm for which Mr. Vignec works doesn’t manage investment assets on its own. Instead, it refers investing clients to another advisory firm, Matson Money. While Matson manages portfolios in a manner that I can endorse, they charge far too much to do it (up to 2% per year). These high fees are needed to allow Matson to pay 60% of those fees back to Vignec’s referring firm, Erickson Wealth and Tax Management.

Before you attend any investing class, do a bit of research. Find out who is teaching the class and where they work. You can discover a lot of great information at adviserinfo.sec.gov. In the left column, click on Investment Adviser Search. Type in the person’s (and/or firm’s) name. Select the most likely name from the displayed list. If you are researching an individual, their firm name should be listed or if the person in a broker, you will see a link to FINRA’s Broker Check service.

If the person works for a registered investment advisory firm, you should search for the firm by name. When you have found them, go to the left column and scroll down to “Part 2 Brochures” and click the link. A pdf file will download that contains information on how the firm manages money and how much they charge. These will provide valuable clues about the advice you might expect to receive. 

Finally, should you decide to attend a class, ask the instructor is there will be any attempt to sell you on his or her services. Find out if they sell products for commissions or if the advise for a fee only. Are they required by law to act in their client’s best interests (are they fiduciaries)? Finally, if any investment instructor tells you that they (or you) can pick the best securities or know when to be in or out of a particular part of the market, walk away. You need to learn the facts of investing, not financial fantasies.