Ray Lucia Defamation Threat

For more visit: A Professional’s View of Ray Lucia’s Non-Traded REITs

Investor and local radio talk show host Ray “Buckets of Money” Lucia has threatened to sue me for $300,000 for defamation over a blog post I wrote last month.

Robert K. Butterfield, a San Diego attorney, is outraged that I dared to besmirch the good name of Raymond J. Lucia, who dispenses financial wisdom on a daily radio show in several big media markets. This is after all the same man actor Ben Stein recently described in an opinion piece in The New York Times as a “stock guru.”

Attorney Butterfield insists that I must stop pointing out Lucia’s relationship to San Diego-based First Allied Securities, which recently agreed to pay nearly $2 million to settle U.S. Securities and Exchange Commission charges that it failed to supervise one of its employees.

He also demands that I never again repeat the blasphemy that fees for Lucia account run as high as 2 percent, paid quarterly in advance. (Lucia Defamation Threat Letter)

Your statement that Mr. Lucia’s company has never charged a management fee of 2% is completely false and another intentional malicious act. His company has never charged a management fee of over 1% even though they have the ability to charge up to 2% — but you did not bother to check this — did you?

Even though Lucia’s own SEC disclosure plainly states “The standard annual managed fees for RJL [Raymond J. Lucia] Adviser Directed accounts are 2 percent,” Attorney Butterfield has a point. Fees for one “wealth management” program pushed by Lucia actually run as high as 2.9 percent

That is an eye-popping number. It’s about half of the compound rate of return of the Dow Jones Industrial Average for the past 50 years. That fee is assessed on the entire value of whatever you invest with Lucia, even if he loses money. It makes me wonder whose wealth is really being “managed” here.

This fee information comes from Lucia’s own mandatory SEC filing of February 2010. (Click here to read Lucia’s SEC Form Adv II.)

In a follow up e-mail, Butterfield had the temerity to insist that I disregard what the SEC filing says:

And Ray has never charged 2%. Or anything over 1% as an advisory fee. The SEC filing is a routine one and most investment advisors have similar statements. Such statements just mean someone is authorized to charge such a fee. The fact it is authorized under SEC filings does not mean he ever does. In fact is not it admirable that he could have charged 2% but never did??

It just doesn’t make sense that someone would disclose a standard fee that customers are never charged.

I asked Chicago attorney Andrew Stoltmann about this. Stoltmann is both a securities lawyer and a registered investment advisor like Lucia. Here’s what Stoltmann had to say: “Usually registered investment advisors disclose the amount they charge or a range they charge. This tends to be common practice.”

Stoltmann has been warning about the kinds of accounts marketed by Lucia known as “wrap” accounts, which charge one all-inclusive fee.

According to Stoltmann, these fee-based accounts are being marketed to retirees and seniors who don’t realize that they are getting gouged. As he wrote in a March 31 post on his website, investmentfraud.pro:

Unfortunately, financial advisors tend to jam clients into wrap fee accounts who are buy and hold investors and therefore not profitable. Often, the wrap accounts are nothing more than a fee grab by unscrupulous stockbrokers and financial advisors. If a client is buying and holding stocks or bonds (what virtually every client should do) it is extremely frustrating for the broker and brokerage firm.

This is where Lucia comes in.

Lucia’s “Buckets of Money” retirement strategy is little more than a teaser, according to his SEC disclosure. His clients typically don’t have to pay to hear the Buckets spiel. This advice is free to clients “that anticipate establishing an on-going asset management arrangement” with him and the folks he represents.

Lucia’s own buckets get filled with money — your money — when he gets you to sign up for accounts that are managed by Chicago-based companies.

Lucia gets a cut of the fees these companies charge. His cut does not exceed 1 percent (this may be what Butterfield is referring to.)

Lucia’s “policy,” as he described it to the SEC, is to recommend either:

  • the RJL Wrap Fee Program or
  • the RJL Wealth Management Program.

The RJL Wrap Fee Program

The “sample” fee schedule for the RJL Wrap Fee Program is as follows:

On the amount up to $250,000 2%
On the next amount from $250,000 to $750,000 1.85%
On the next amount from $750,000 to $2,000,000 1.70%
On the next amount over $2,000,000 Negotiable

The RJL Wrap Fee Program is comprised of four different strategies. Raymond J. Lucia Cos. Inc. runs one. The rest are run by Advanced Equities in Chicago — not Lucia.

Advanced Equities serves as “portfolio manager” with “discretionary authority.” That means Advanced Equities — not Lucia — will have control over your money and can buy and sell the investments in your nest egg without consulting you first.

Advanced Equities indirectly owns First Allied Securities, the San Diego firm that was the subject of the SEC complaint mentioned earlier. Advanced Equities also was the subject of a 2008 story in Forbes magazine. The story quoted an anonymous AE employee describing the company as a “prototypical bucket shop.”

The Forbes story notes: “AE has gone so far as to file defamation suits against two attorneys who represented angry clients.”

RJL Wealth Management Program

The program that Lucia markets to clients as the RJL Wealth Management Program is actually run by another Chicago-based firm called Envestnet Asset Management Inc.

The minimum account in the wealth management program is $100,000.

From Lucia’s SEC disclosure:

The maximum fee charged for Accounts that maintain equity stock as Program assets shall not exceed 2.9% annually or 2.65% annually for Accounts that maintain only mutual fund Program assets.(emphasis added)

The fee is deducted automatically, beginning on the day after you put money in the account.

This is not a wrap account because even this astronomically high 2.9 percent maximum doesn’t mean that clients won’t still have to open up their wallets for more:

Other costs that may be assessed to a client, and that are not part of the [RJL Wealth Management] Program fee, include fees for portfolio transactions executed away from Fidelity, IRA and qualified retirement plan charges, dealer mark-ups, electronic fund and wire transfer fees, market maker spreads, exchange fees and broker/dealer fees, among others. Mutual funds, exchange traded funds (“ETFs”), and alternative investments may charge their own fees (such as 12(b)-1 fees and surrender charges) for investing the pool of assets in the respective investment vehicle.

This is known as death by a thousand cuts.

It’s a real fee bonanza. Yet Lucia keeps his hands clean because because he is little more than a pitchman for these high-fee accounts. The Chicago companies deal with the complaints.

The moral of the story: If you take Lucia’s advice, you may someday find that one of your buckets has a hole in it.


  1. Michael Schwartz

    I note with some glee your comment about the buy and hold, you mention what every client should do. In 2008 clients who bought and held would be down half their investments. Please if you are going to write have at least a bit of a clue.

    • Mark

      Buy and hold is exactly what investors ought to do the science of finance is very clear on this question. Trading your portfolio is a insane and stupid idea marketed to unthinking dopes by the brokerage industry. Market timing is the worst way for investors to attempt to manage risk. What is needed is broad diversification and asset allocation (diversification among different asset classes) followed by the occasional re balancing. If your portfolio was cut in half it simply means you were invested entirely in equities. If that is uncomfortable for you then you may want to try investing more of your money in high quality short term fixed income and cash (or cash equivalents). When equity markets rise sell equities and buy fixed income (sell high). When equity markets decline sell fixed income and buy equities (buy low). Make sure you have the proper diversification and asset allocation for your own risk tolerance and use low cost index funds instead of expensive managed funds. Always take into account your taxes, fees and transaction costs (because you have real control here) and stay away from financial scam artist. Happy investing!

  2. PublicRecordsGuy

    Hey @Michael Schwartz the purpose of this posting is clearly about a PERSON not a recommended investment practice. Catch a clue.

  3. Blow me

    Ray is full of bull he needs to learn the basic math concerning time value of money and stop talking so much bs. Really does he think people are that dumb or that he is so smart.

  4. Ace Carter

    Ray Lucia SPONSORS Jew-Christian Persecutor Bill Handle on KFI and brings Handel to his seminars.

    Lucia has apparently ignored my email to him bearing roughly the following complaint…

    RE: Your decision to sponsor Bill Handel on KFI 640-AM
    – Version 2.0 –

    As a long time listener to LA talk radio and one who is concerned about Public Airways smut and attacks on sincere religious believers DAILY on The Bill Handel Show… I urge you to think about your ads…
    Part One…
    Handel REPEATEDLY and Regularly ATTACKS and demeans Christians, Jews, Catholics and Mormons regularly without even the slightest knowledge of the beliefs or customs of these major world religions… He says he hates the Catholic Church…
    Handel mocks Jesus Christ regularly
    Your sponsorship enables Handel’s attacks.
    Handel also demeans former sponsors like Cantor’s Deli AFTER they brought him and the cast free
    “Jew Food..” for over a year. They apparently dropped him after he attacked Israel…
    Part Two…
    Handel seems obsessed with repeatedly and regularly inflicting the most extreme sorts of obscene, repulsive and filthy descriptions of sex with animals, excretory functions, masturbation and gay prison sex… Upon his listeners.
    Handel seems to delight in mentioning the small size of his penis in comparison to those of other men, including the racial stereotype of all black men having large penis’…
    IF you somehow think that YOUR BRAND, product or service will benefit and prosper while being associated with Handle and his hateful obsessions, wade right in…
    Most people believe in and fear God… And reject such attacks on things they view as precious and sacred…
    MOST WILL NOT retain a favorable view of YOU and YOUR business or service.
    Ace Carter – 661- 944-3546
    *** You might question what the Program Director at KFI, Robin Bertilucci has done about Bill Handel and his regular abuse of KFI’s license to legally operate
    on OUR Public Airways…
    Ms. Bertilucci has yet to do anything other than to contact my ISP (Inter Net Service Provider..) and LIE by telling them that I have been harassing them by sending her a courtesy CC email of each sponsor I have contacted and threatened my ISP with Clear Channel blocking ALL emails from EVERYONE using their ISP…
    THIS has caused them to react by canceling my ability to send ANY emails to anyone.
    My complaints to the parent company …
    Clear Channel Communications Corporate Offices
    have been ignored…

    • James

      Real simple, if you don’t like someone’s opinion, point of view, or their beliefs… don’t listen to them! I chose to not listen to Bill Handel, so should you. Stop worrying about how much YOU hate and just find something you like. Damn people that get offended about everything! Oh, and I am Catholic!

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  7. Mark Dias

    I read Ray Lucia’s new buckets of Money book, and I am very skeptical on his non-traded REITs. I had one of his people come over to see if the strategy worked for me. I had to ask him to send me a prospectus of the variable annuity since on the first visit, they bring no products. I read it and it was laden with fees. Everywhere you turned there were more fees. Even the mutual fund the use has a 5 % load (I didn’t think anyone charged that anymore) and 2.95% annual expense ratio – ouch.

    I then checked into Vanguard (where I currently have all my assets) and they have a very reasonable variable annuity, and they use their low fee mutual funds and no surrender charge.

    So, Ray no thanks I will stick with Vanguard.

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