We have had some clients ask if we had put any money into any Bernard Madoff managed accounts and the answer is no. This was a situation that many should have seen coming, and in fact, many were wisely very skeptical of the returns being shown investors.  LPL Financial reported this week that the only exposure among approved products were slices of hedge fund of funds which we did not use. Here are some of the things that you should know distinguish what we do from what they did.

1.       We hold all of our client investments with an unrelated party; LPL Financial Services or at the sponsoring firm.  Madoff apparently held all accounts at Bernard L. Madoff Securities, LLC.

2.       Statements are generated directly from LPL Financial or the sponsor, not from us.  Madoff was apparently printing his own statements.

3.       Clients have online access to accounts.  Madoff offered little information on accounts he managed, and nothing as timely as online.

4.       You receive a confirmation for every buy or sell in your SAM or brokerage accounts.  Madoff apparently did not even provide periodic data as to what exactly was owned in the accounts he managed, much less the buys and sells.

5.       We work with and hold many of the largest and best known stocks and fund managers in the world, and annual reports and other information come directly from them to you.

6.       We primarily utilize stocks, bonds and mutual funds, which are easy to gain information on, review and buy or sell relative to many other investments due to substantial regulatory oversight and active markets.

7.       Madoff’s clients were primarily very large individual investors and institutions and his investment firm was structured to avoid the much tighter scrutiny required for investments made by the general public.  On the other extreme, we are perhaps the most heavily regulated and tightly watched section of the financial world with overlapping federal, state and self-regulatory bodies as well as third-party internal audits annually.  In fact, you will not read this letter until an LPL compliance officer has reviewed and approved it for accuracy and compliance.


In short, we have chosen an investment approach that reduces the risk of a rogue Bernie Madoff bringing your financial life crashing down as many of his clients have experienced.  We never recommend putting all of your money in any one basket, even a bank or the US Government. We diversify client portfolios not only by asset classes, style, currency, credit rating, maturity and company size among other things, we diversify among management companies.  Seldom do we recommend that any client have even 10% of their assets managed by any single person, no matter how savvy they have been in the past and never have we used an outside broker/dealer like Madoff’s. 


We will continue to try to make wise moves and avoid the moving potholes during this difficult time. Thank you for your business.