Charles Lieberman's letter to the editor, concerning Retail Properties of America Inc., “
REIT's
IPO helped reveal its actual worth” [April 30] contains two errors. I am writing because your readers need to understand the deal.
The first error is that Inland Western Real Estate Trust, which evolved into Retail Properties of America, was not a private real estate investment
trust. It was a public, nontraded
REIT.
A public, nontraded
REIT is more transparent and is required to publish its quarterly and annual reports.
The second error in Mr. Lieberman's letter to the editor destroys his whole logic.
He wrote that the original $10 shares are now trading at “about $9.” However, because of a complicated 10 for 1 reverse split and then a bonus
dividend, each $100 worth of shares of the original investment was converted into one “A” share, and one share of “B1,” “B2,” and “B3.”
Since the “B” shares have restrictions, $100 of an original investment is now worth about $30.
Mr. Lieberman should have explained it by writing: “The shares were sold at $10; they are about $3 now, and the investors got some dividends — not too bad.”
To make things even worse, however, investors who chose to reinvest their dividends in the last quarter of 2011 paid $6.95 for shares now worth $3.
Mr. Lieberman gave Inland Western a pass in the explanation in his letter. It's a pass that they really don't deserve.
Lawrence M. Cohen
REIT adviser
Scottsdale, Ariz.
I am responding to the Viewpoint article “Protect retirement assets from self-serving advisers” [April 30].
There have been many articles, espousing varied opinions, on what is the most appropriate compensation for advisers under the fiduciary standard. I firmly believe that fiduciary standards can be met by every financial adviser simply by adopting the following rule in all dealings with current and potential new clients:
If you remember who the client is, then you have met the highest fiduciary standard.
Once that is accepted as the rule of practice, the manner of compensation is irrelevant. The focus of a responsible adviser is meeting each client's specific goals with an appropriate solution. It is also paramount that planners obtain sufficient understanding of their clients' financial circumstances prior to providing any recommendations.
In the Viewpoint article, the author's proposition is that commission-based advisers are interested solely in recommending the investment that will provide them with the maximum compensation. I do not agree with that position.
Such a case would fail to meet the fiduciary standard, as stated above. However, fiduciary responsibility requires finding the most appropriate solution to meet the client's need, without regard to compensation. Once that goal has been met, any of the compensation methods are appropriate.
The commission of $1,000 in the stated example is a one-time payment and does equal eight planning hours at $125 per hour.
What seems to be overlooked is the time spent by the commission-based adviser with the client prior to, during and after the investment has been placed and the commission received.
The adviser in the commission-based example will continue to receive a small amount of compensation derived from the original transaction. The question that is not addressed is whether the commission adviser is charging for meeting with the client during the year or years they use the adviser's services. If the adviser is meeting with the client on an as-needed basis, at no cost to the client, the dynamics of the actual compensation for services changes.
The commission would therefore provide much greater benefit than the one-time payment.
I believe there is a far greater challenge to the
financial planning community than compensation. It is in the area of maintaining professional knowledge and expertise. I have attended seminars where seasoned advisers have asked questions to which first-year trainees would know the answers.
Fiduciary responsibility requires maintaining professional standards, and the seeming lack of basic knowledge evidenced by such individuals brings their competence into question.
There will always be advisers who are interested only in their next income check, be it fee-based, a percentage of assets or a commission. Unfortunately, those individuals are the ones whose stories make it into the newspapers.
When their activities are reported, it makes it difficult for a professionally responsible adviser to overcome the public's perception that their only interest is in providing solely for their own well-being and not that of their clients. Those articles fail to acknowledge that oppressive regulation can never replace due professional care in providing clients with appropriate investment and retirement solutions.
Brian E. Glickman CPA
The Investment Center
Smithtown, N.Y.
Thank you for the “Just Thinking” column “When the tax man cometh for our troops” (April 30) on the confusing tax laws facing our active-duty military.
My son is a combat engineer in Afghanistan, so this was of particular interest to me. I plan to forward Jim Pavia's column to my local congressman.
We receive a number of financial publications in our office, but
InvestmentNews is the hands-down favorite.
Janice Bjorstad
Chief operating officer
Feltz Wealthplan
Omaha, Neb.
