How to get help with your 401k from Mullooly Asset Management.

This process will also help you with your 457 deferred compensation plan — or your 403(b) annuity at work.

First, if Mullooly Asset Management has never worked with an employee from your company before, we will need to get the list of investment choices available to you in your plan.  You can fax them to us at (732)223-9600, or you can send us the link to the website (if we don't need a password), or you could copy and paste the list into an e-mail or Word document.

We are not looking for your specific investments, or your most recent statement! What we need is an inventory — a list — of all the choices available to you within your plan.

We will need a day or two to review the choices available in your plan, take a look at the charts, and come up with a game plan.

We will then call you back — or set up by convenient time for us to speak — and review the best performing choices available to you in your plan at the present time.  This phone appointment should take no longer than 15 minutes.

Unlike financial planners or others in the investment advisory business (many use asset allocation pie charts), the recommendation you will be given will be based on what is working — right now — and are the best choices available in your plan today.  One of our core beliefs is "when the charts change, we change."

We will then alert you — usually by e-mail — when it is time to add, subtract, move money into, or out of — a particular investment in your 401(k) plan.

There are some years where we might make three or four changes.  There will be other years where we make significantly more changes.  The whole concept is to keep your money invested in the strongest asset classes at the current time.

Since Mullooly Asset Management is a fee only investment advisory firm, we have no product or investment to sell you.  We take a fiduciary obligation to manage your money strictly with your best interests in mind.  Unlike brokers (employees of brokerage firms) and some financial planners (who may work on a commission basis, or a "fee-plus commission" basis), a fee only investment advisor's only income comes from the fees generated by offering advice.

Therefore, it's in everyone's best interest (the Fee-Only advisor and the client) to avoid large risks and losses.

After we have had a chance to review the choices available in your plan, we encourage you to meet with us over the phone and be sitting in front of a computer with Internet access.

We use computer-sharing software.  This will allow you to see the charts of the choices in your 401(k) plan, as we describe the process to you.  This will also give you a visual demonstration of how we manage the risk for our clients.  We can usually accomplish everything on our agenda in less than 15 minutes over the phone with you.

We are not going to judge your prior investment performance.  We are primarily concerned with which investments are working today in the plan — and how to invest your money properly right now.  Since the future is unknown, it is a waste of time to predict what markets will do in the future.

At the conclusion of the call, if you are satisfied with what you've heard, we would be delighted to send you an investment advisory contract for you to review and sign.

Pretty sad story reported recently…but sad, as in pathetic.

Guy Wyser-Pratte, who is known on Wall Street as a shareholder activist and runs a $500 million hedge fund, recently reported that the private banking operation of J.P. Morgan Chase had "somehow" allowed many small electronic transfers out of his personal account, over a period of time (15 months). Each transaction represented only several thousand dollars. However, the total of these withdrawals was more than $300,000. But these electronic transfers were not authorized.

Did he get all of his money back?

No. The end result of his saga, apparently will be a recovery of just $50,000.

Why?

Apparently, Mr. Hotshot Wall Streeter never bothered looking at his monthly bank statement. Look…if you don't contact your bank or broker within 60 days from the date the statement is printed… you are essentially saying "I agree" with everything printed on that statement. And you probably won't have a leg to stand on if you come back six months (or a year), later announcing some discrepancies found on your statement. The responsibility is yours.

Now, Wyser-Pratte claims that since he opened that account "years and years ago" he doesn't recall signing a document agreeing to that "60 day" stipulation.

He's right…he probably didn't sign anything like that. But maybe he should look on the back of his bank statement! It's usually written there…every single month. It ticks me off that some big shot takes his eye off the ball and tries to put the blame on someone else.

If you get a statement from a bank or broker — and you don't do anything regarding a possible discrepancy you may find within 60 days from the date of this statement, you are accepting the statement as it's printed. Essentially, you are out of luck. Please don't tell me you are as careless as Mr. Hotshot Wall Streeter.

Didn't this guy have someone reconciling his bank statements? Scary! Additionally, Wyser-Pratte states that the monthly statements have become so complicated he had trouble deciphering them. Wow! And he manages money for a living?

This is just one of the reasons why I encourage new clients to review their first few monthly statements with me. It's important that you understand what's happening inside your account. The first step is understanding how to read your monthly statement. Look, more and more transactions are taking place electronically. You supply your routing number and account number over the phone and you are giving the keys to your bank account to someone. It's a little scary, but it's 2008. We will have to exercise a little more diligence than we did yesterday, and it comes down to having a certain level of trust.

Or — is it giving away a certain level of trust? What are your thoughts?

In one of my most recent posts I discussed the "ready to explode" product issued by brokerage firms called "auction rate preferred securities."

Well, that didn't take long.

In this past week UBS (the parent company of PaineWebber), announced they are spending $19 billion (yes, billion with a B) to buy back auction rate preferred securities their brokers had sold to their clients. Citigroup (which owns Smith Barney), announced they are doing the same — for $7.5 billion. Merrill Lynch announced that they will buy back $10 billion of these securities sold by their brokers over the next few months.

That is $36 billion these brokerage firms have whipped out their checkbooks for… and we haven't even heard from Wachovia or Morgan Stanley yet!

Understand that the auction rate preferred market is a $300 billion market. It's a lot bigger than people realize. And it's been around longer than most people know. I went on sales calls in the 1980s and marketed these investments as alternatives to commercial paper to universities and small publicly traded corporations.

So everyone is feeling the heat from these brokers walking away from this market… individuals can't get out of these investments, which were sold to them as money market alternatives. Some publicly traded corporations have had to show losses on their books along with anyone else who listened to their broker and used these products as an alternative to short-term investments like treasury bills and commercial paper.

One of the best questions you can ask whenever considering an investment you are unfamiliar with, is this: "OK, sounds good. Now how do we get out of these things?"

Oh boy, these kinds of headlines are never good.

Two former Bear Stearns portfolio managers were arrested this week, not because they did a poor job of managing money. They were arrested because they misled investors in a few ways:

They told investors they personally had more money than they actually had in the fund (one of the two managers had removed $2 million of his own money when it appeared trouble was brewing).

In speaking with Barclays Bank (at the end of February 2007 – right after removing some personal money) "As you can see," one of the managers wrote, "despite the sell off in the subprime mortgage market, our fund continues to do well, quite well, in fact."

In April 2007 they expressed concerns privately in emails, but just days later, they held a conference call with investors, telling them there are "no serious long-term problems with their investments."

I'm not going to speculate on the merits of the case. But this is a good opportunity to remind readers of one of the major differences between brokers and investment advisers: investment advisers carry a fiduciary obligation to their clients, brokers do not. An investment in a hedge fund, which is an unregulated investment portfolio, is definitely NOT like dealing with a traditional stockbroker and brokerage account (not even close).

But still, in this case, it appears there are brokerage firm employees possibly not disclosing some very relevant information. The way the story has been told through the media this week, it is difficult to say the money managers were on the same side of the table as the clients.

There is a good recap of the events you can check out at: Bloomberg.com's website.

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