The "Buckets of Money" Seminars: Who Pays?
Ray “Buckets of Money” Lucia, the host of an investment radio talk show, has been going around the country hosting retirement seminars with actor Ben Stein.
The seminars are free to attend, but they’re not free. Someone is paying for them. If you’re considering investing with Lucia, it’s important to understand that the person who may wind up paying is you.
Money for the “Buckets of Money” seminars comes out of the pockets investors in RJL Wealth Management, according to Lucia’s own client disclosure.
In addition to being the main sponsor of Lucia’s seminars, RJL Wealth Management advertises on his radio show. It pays Lucia a fee for referring potential clients. It also pays him hourly consulting fees. The amount of this compensation is not disclosed.
RJL manages more than $300 million in assets in 4,880 accounts, according to its filing with federal regulators.
As I noted in an earlier post on Lucia’s fees, the RJL Wealth Management Program charges staggeringly high fees of as much as 2.9 percent annually.
Lucia’s SEC disclosure states that for his solicitation and consulting, he receives a portion of the fees collected by RJL Wealth Management that “shall not exceed 1 percent” annually. One percent of $300 million is $3 million a year.
You would be forgiven that Lucia is essentially paying himself. In fact, Lucia is being paid by his son, Ray Junior, who runs RJL Wealth Management. Dad is listed as a consultant and member of the advisory board (along with Ben Stein).
The arrangement between the Lucias leads inexorably to a conflict of interest.
Both Lucia junior and senior are SEC registered investment advisers. Registered investment advisers are considered fiduciaries, which means they have a legal duty to put their clients’ interests first. So whose interests come first clients or Lucia father and son?
I think the answer can be found in a complaint against Lucia Senior that was filed with the Financial Industry Regulatory Authority in December.
An unnamed client accused Lucia of breach of fiduciary duty for failure to execute stop loss orders in between June and December 2008 when markets plummeted in the depths of the financial crisis.
The client claimed $24,631 in damages. Lucia settled for $18,000 for “business considerations in order to avoid the cost of arbitration,” according to FINRA.
According to FINRA’s summary of the case:
Mr. Lucia was listed as a joint representative on the account for administrative purposes, but did not interact with the client and made no recommendations or representations, as those alleged or otherwise.
In other words, Lucia really had nothing to do with the account or the client. His name was on the account only “for administrative purposes.”
2010 Top San Diego Money Managers
The top San Diego money management firms with more than $1 billion in assets under management based on SEC regulatory filings as of June 12, 2010.
|Firm Name||Location||Assets Under Management|
|Brandes Investment Partners, LP||San Diego||$53,111,776,127|
|Pacific Corporate Group LLC||La Jolla||$19,823,150,992|
|Guided Choice Asset Management, Inc.||San Diego||$19,238,786,500|
|PCG Asset Management, LLC||La Jolla||$19,203,420,729|
|Nicholas-Applegate Capital Management LLC||San Diego||$9,916,244,833|
|Gurtin Fixed Income Management, LLC||Solana Beach||$6,747,183,972|
|Relational Investors LLC||San Diego||$6,033,534,431|
|Chandler Asset Management Inc||San Diego||$5,005,221,338|
|Globeflex Capital LP||San Diego||$4,182,000,000|
|LM Capital Group, LLC||San Diego||$4,010,525,407|
|Clarivest Asset Management LLC||San Diego||$1,800,000,000|
|First Allied Securities, Inc.||San Diego||$1,654,019,937|
|Stolper & Co., Inc.||San Diego||$1,574,982,908|
|Wall Street Associates||La Jolla||$1,528,000,000|
|Dowling & Yahnke, LLC||San Diego||$1,473,382,112|
|Denali Advisors, LLC||La Jolla||$1,274,412,604|
|Rice Hall James & Associates LLC||San Diego||$1,203,218,265|
|Caywood-Scholl Capital Management LLC||San Diego||$1,094,183,050|
|Independent Financial Group, LLC||San Diego||$1,043,692,374|
|Macquarie Funds Management||Carlsbad||$1,005,232,323|
@ 2010 Seth Hettena
San Diego County Pension Lowers Rate of Return
San Diego County’s pension fund just handed the county bill for more than $30 million a year yet no one seems to have noticed.
Every three years, San Diego County’s pension fund looks into its crystal ball and decides what it expects investments returns will be over the next 50 years.
It’s arguably the most important and difficult decision the board has to make. Even a small change can force the county to cough up millions of dollars each year.
Yesterday, the board of the San Diego County Employee Retirement Association lowered its assumed net rate of return from 8.25 percent to 8 percent effective July 1, 2011. (Watch the meeting online here.)
A quarter percent may not sound like much, but it’s a change that will force the county to pay 3 percent of payroll each year. Using last year’s payroll numbers, that works out to roughly $33.88 million.
The 8 percent assumed rate of return represents the pension’s best guess about how the fund will do in the future, so that the county can set aside money to ensure the plan is well funded.
The shift to an 8 percent assumed rate of return moves San Diego County’s pension more in line with other big state pension funds. CalPERS, the $200 billion retirement system, is reviewing its assumed 7.75 percent rate of return and will make a recommendation to the board whether to lower it later this year.
Three years ago, the pension’s actuarial consultant, Segal Group, recommended an assumed rate of return but the then chief investment officer, David Deutsch, promised that he could generate the additional 8.25 percent with his Alpha Engine.
Deutsch resigned under pressure shortly before the pension reported losses of $2.4 billion for the 2008-2009 fiscal year.
The assumed rate of return is perhaps the most important variable in calculating a key barometer of a pension’s health known as the funding ratio — the ratio of assets to liabilities. SDCERA’s funding ratio stands officially at 91.5 percent, but that’s only because of an accounting practice that defers losses over several years.
If last year’s $2.1 billion loss were to be recognized right away, San Diego County’s pension fund would only be 65 percent funded, according to a report by an independent consultant. That’s well below the 80 percent that pension experts regard as healthy.