Wall Street Firms Get Their Comeuppance, Says Edelman "Good Riddance!"
For Immediate Release
September 19, 2008
Mark Bagley
703-227-0541
mbagley@RicEdelman.com
FAIRFAX, Va., Sept. 19 — Wall Street may be receiving its just deserts for offering up unstable and exotic investment products to the American public, according to leading independent financial advisor Ric Edelman, who says the consumer will be better off as a result.
Edelman, founder and chairman of Edelman Financial, said investors are now facing a less cluttered landscape and are poised to position their portfolios for the next market rebound.
“The esoteric investment products Wall Street devised to fund the mortgage and real estate boom — collateralized debt obligations, structured investment vehicles and auction-rate securities — proved to be unsustainable over the long term. To those products, we say ‘good riddance’.”
The most important action for investors to take now regarding their investments is to make sure they are extensively diversified, said Edelman. “With proper diversification, you’ll be well positioned when the market recovers — and it will. People always say, ‘But this time it’s different!’ Well, the government has done bailouts many times before, including Lockheed, Chrysler, Continental Illinois, Long Term Capital Management and more. This is nothing new. And every one of the 13 bear markets we’ve experienced since 1945 has been followed by a tremendous bull market.”
The key, said Edelman, is not to make any big bets. “The people who have suffered horrific losses this week likely had big amounts in single companies such as Fannie Mae, Freddie Mac, Lehman Brothers, AIG and Merrill Lynch.”
“Our clients own stocks, of course, but they are spread across 10,000 stocks in 40 countries. And we don’t stop there. They’re also invested in bonds, real estate, and natural resources — we use up to 19 different market sectors and asset classes.”
After evaluating and adjusting their portfolios, Edelman said other action steps consumers should take now include the following.
- Build a cash reserve and eliminate credit card debt to get you through unexpected job loss, health issues or other family concerns. A home equity line of credit is not a substitute for cash reserves.
- Protect your family by owning the proper amount and type of insurance — life, health, disability, long-term care, auto, home and liability.
- Start or continue contributions to your retirement plan at work. Invest in a highly diversified manner, and avoid the stock of your employer.
- Get the biggest mortgage you can afford. Interest rates are declining — a happy side effect of economic weakness — so now’s the time to convert home equity into a liquid resource.
- Preserve your legacy. Update your estate planning, and make sure your will, trust and other legal documents are current and complete.
Above all, said Edelman, “Be realistic, be patient and be confident. Further destruction is likely to come to the traditional structure of Wall Street, but we don’t believe that to be a long-term problem for Main Street.
“Remember that only four years ago, the Dow Jones Industrial Average was at 7700. It had fallen 45% over three years,” said Edelman. “Do we really want to complain that the stock market has fallen about 20% from last October’s high, or do we want to instead remember that the Dow is still nearly 50% higher than it was four years ago?”
Edelman has been named by Barron’s as one of the nation’s Top 100 Financial Advisors five consecutive times (2004-2008). His Fairfax, Va.-based firm manages $4 billion in assets for individuals and families nationwide. Edelman has been providing financial advice to consumers for more than 20 years. He hosts The Ric Edelman Show, syndicated nationally on the ABC Radio Networks and is the author of six books, including his current best seller The Lies About Money (Simon & Schuster).
Edelman Financial is a marketing name for two affiliated registered investment advisers. Edelman Financial Services LLC primarily serves the Washington D.C. area; Edelman Financial Advisors LLC serves clients nationwide via its own advisors and unaffiliated registered investment advisers. Sanders Morris Harris Group (Ticker: SMHG) is majority owner of EFS. Ric Edelman is majority owner of EFA and minority owner of EFS.
Ric Edelman is an Investment Advisor Representative and offers advisory services through Edelman Financial Advisors LLC and Edelman Financial Services LLC, SEC registered investment advisers. Ric is also a Registered Representative of and offers securities for Edelman Financial Services LLC through SMH Capital Inc., an independent broker/dealer, member FINRA/SIPC.
Barron’s rankings, “Top 100 Financial Advisers,” (compiled by independent financial industry researcher R.J. Shook, based on assets under management, advisor’s contributions to the firm’s revenues and profits, quality of service, and client satisfaction).
Rescue Your Money, written by award-winning financial advisor Ric Edelman, is your personal investment recovery plan.
