Personal Finance Tip


Steve Atwater, a former Denver Bronco, was so impressed with International Management Associates he put about $3 million of his family’s money into the company’s hedge funds-bad idea. His personal finances as well as his retirement planning efforts have taken a huge hit. He even went to work for the company as a “client liaison.” Because of his connections former Broncos including Rod Smith, Terrell Davis and Ray Crockett also poured millions into the hedge funds.
Long story short the founder, Kirk Wright, is accused of hiding massive losses from investors after raising up to $185 million, most of the money is missing. Having been an investment advisor for 15 years this story turns my stomach and here are “red flags” I would always ask clients to consider:

1. Forget the Client Liaison. Chances are they don’t know any more than you about investing, but they have a lot more name recognition than you.
2. Always check with the SEC (Securities and Exchange Commission) to see if there are currently any complaints on file.
3. Always ask for professional references.. They will always tell you they can’t give out client references because of confidentiality, so ask for the professional references. These might include banks, attorneys, brokerage houses that they clear the trades through and accountants.
4. Always demand audited financial statements.. Make no exceptions-if they can’t provide them, run the other way.
5. Consider your current Financial firm.. If you feel the need to go the hedge fund route let the Merrill Lynch’s of the world do the due diligence. Yes, you will give up some performance for this service but in case of fraud you’ve got the big guys on your side.

Finally, ask yourself-are these returns too good to be true and then go with your gut!

Steve Mertz
Do Your Due Diligence

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