The Triad Perspective

Triad Investment Management, LLC is a SEC-registered investment adviser based in Newport Beach, California.  We manage portfolios, including retirement and corporate accounts, and provide investment counsel to our select group of clients, which include:
  • Business owners
  • Affluent families and individuals
  • Corporate executives
  • Family offices
  • Endowments and foundations
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Caveat Emptor?

The word "client" has its etymology--a fancy word for origin--from the Latin word cluere--to hear or obey--or cluens--heeding, and originally described a person under the protection of another person. Nowadays it's morphed into meaning a business relationship of some nature.
We like the old-school definition of a client as someone being protected by another. As investment advisers, we're fiduciaries, bound by law to act at all times solely in the best interests of our clients. While we don't think we need a legal standard to tell us we should always act in the best interest of those we represent, it's not a bad idea to have it ingrained in your adviser, legally or morally.
Unfortunately, this standard isn't applied uniformly throughout the financial services industry. Many advisers aren't required to always act in the best interests of their clients. Brokers, for instance. Why? I'm not smart enough to understand that. Ask the regulators.
Life insurance is one area with lots of room for brokers and insurance agents to fall short of a fiduciary standard. I recently read an article in the Wall Street Journal regarding some Universal Life insurance policies sold decades ago which are now coming back to bite the unsuspecting policyholders. The agents were either clueless about the risks or too aggressive in selling the policies. In either case, not the kind of stuff you'd like to see from an adviser.
Back in the 1980's and 1990's, life insurance policies were generally term life or whole life. Term offered protection for a defined number of years and no cash value at the end. If you died during the term, your heirs got a pile of money. Whole life provided a buildup in value, and when you died your heirs received some payout. The rub with whole life is high costs generally meant rather meager payouts compared to high premium costs.
So, when interest rates started rising in the late 1970s and stayed high during the 1980s and 1990s, many people said bye-bye to whole life. The smart move was to buy cheaper term life and invest the premium savings in high-yielding accounts. So, what did the insurance industry do? Why, those creative minds developed a new policy to lure these potential customers back.
Universal Life was that new product; a one-year term policy that renewed annually. UL sold clients on the idea that high interest rates over the long-term would provide the funding to keep premiums from rising and generate enough income to actually lower the policy premiums in some cases.
Unfortunately, as often happens, life intervenes. Double-digit interest rates gave way to single-digit interest rates. Which gave way to invisible interest rates during the past ten years or so. Policyholders received notice from insurance companies that renewal premiums had doubled or tripled in many cases. Some folks paid more in premiums than the death benefit. Yes, you read that right.
What's the point of all this? Yes, we all know that insurance can be complicated. And things don't always work out as planned, especially over decades. But, it sure would be nice to know that going in, you had an adviser who was thinking solely about your best interests. Many of these people didn't have that. They had salespeople who were looking to earn high commissions, then move on to the next victim. I mean policyholder.
Caveat Emptor. Yet another Latin phrase...meaning "buyer beware." In my view, it shouldn't be necessary in the financial arena. You should employ a person who isn't an adversary, but rather is looking out for you. At all times.
Perhaps it's a matter of aligned interests. Or just luck or good fortune to find an ethical person. Regardless, the relationship shouldn't be the financial equivalent of the Colosseum of ancient Rome, where you need to fend for yourself against the armed Gladiators of the financial world.

-John Heldman, CFA


Past performance does not guarantee future results.  Results are presented net of fees and include the reinvestment of all income.  The opinions expressed herein are those of Triad Investment Management, LLC and are subject to change without notice. Consider the investment objectives, risks and expenses before investing. The information in this presentation should not be considered as a recommendation to buy or sell any particular security and should not be considered as investment advice of any kind. You should not assume that any securities discussed in this report are or will be profitable, or that recommendations we make in the future will be profitable or equal the performance of any securities discussed in this presentation. The report is based on data obtained from sources believed to be reliable but is not guaranteed as being accurate and does not purport to be a complete summary of the available data. Recommendations for the past twelve months are available upon request. In addition to clients, partners and employees or their family members may have a position in any securities mentioned herein. Triad Investment Management, LLC is a SEC-registered investment adviser. More information about us is included in our SEC Form ADV Part 2, which is available upon request.  

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