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American Morning
Alleged Dirty Dealing From Financial Experts
Aired June 13, 2002 - 09:22 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL HEMMER, CNN ANCHOR: When it comes to investing, we depend on the pros to make our money grow. But lately, what we have seen from the financial experts are alleged dirty dealings. The arrest yesterday of former ImClone CEO, Sam Waksal, on insider trading charges just the latest example of alleged corporate dishonesty.
And remember Ken Lay and Jeffrey Skilling in Enron and its auditor, Arthur Andersen? And word that analysts and Merrill Lynch were not always honest with investors. So if you cannot trust the CEOs and the auditors and the brokers, who can you trust in your financial future?
Let's talk about it more now with Marion Asnes of "Money" magazine. Here with some important tips to help guide the average investor -- good morning to you.
MARION ASNES, "MONEY" MAGAZINE: Good morning.
HEMMER: Is that a fair question, who can I trust right now, given Enron and Tyco and what we heard from yesterday?
ASNES: Sure, of course. I think that's a fair question even when you don't have these kinds of goings on. I mean, in the end, this is your money, this is what's going to take care of you and your family. And you have to have questions about it to really be doing a good job as an investor.
HEMMER: Well listen, I've got some questions for you, because the reason you're here is to give us some tips to help us walk through. Your tips, and you give fuller, specific ones right now, let's read through them quickly and then we'll come back and talk about them.
ASNES: OK.
HEMMER: Number one, stay very focused on yourself and your needs.
ASNES: Right.
HEMMER: Stay diversified, which is always big-time advice.
ASNES: That's right.
HEMMER: Be consistent in discipline. Make a plan and stick with it.
ASNES: That's right.
HEMMER: And number four is, access the level of risk and decide if it is appropriate for you.
ASNES: Yeah. Well I want to start with the first one, stay very focused on yourself and your needs, because I think that during the big stock market bubble people forgot about that. They weren't looking at their investments saying, what are my goals, what do I have to do to get them? Everybody was just sort of throwing their hands up in the air and going, let's make money.
HEMMER: Yeah. We were throwing darts against the wall, weren't we? And hitting (UNINTELLIGIBLE).
ASNES: That's right. And, you know, it was great fun. And now we've had two years in which the stock market has done badly, and another year, which it seems to be going in the same direction. And you sort of look around and say, well, what's going on?
And I think that this is when that sense of, what is my plan, what is my goal, how much money do I need to reach my goal, becomes more important than ever. Because then you can peg all of your investments around that, and also adjust the level of money that you're saving. You can save more money if you know you're not going to make it.
HEMMER: So true. If you have a broker and you're not happy, if you're looking for a broker and you want to do some investigation here, you have some tips about checking out brokers, four of them again.
ASNES: That's right.
HEMMER: Look at the broker's performance numbers.
ASNES: That's right. One thing that I have to say, you're going to have to ask your broker about this. This is something that is not published, so there's no way to verify it necessarily. You have to talk about your broker about what kind of things they're doing. And then the second tip about getting references and talking to them is the way to do that.
HEMMER: Interview the broker's clients, very important.
ASNES: That's right.
HEMMER: You say they will give you the information if you ask for it.
ASNES: A good broker should give you references, should give you the telephone numbers of a couple of clients. That is not an unreasonable thing to ask. Just as if you were interviewing somebody to work in your home, you would ask for references. Well the same thing is true for brokers. HEMMER: Very good point. Check the Web to see if a broker has been sued. You recommend nesdr.com.
ASNES: That's right.
HEMMER: And then, quickly, do not give anyone discretionary authority over trades until that person has made successes...
ASNES: That's right.
HEMMER: ... which kind of goes back to the track record point, though, right?
ASNES: That's right. That's right. Discretionary authority means that a broker can make trades in your accounts without calling you and asking you for permission. An unscrupulous broker will nag you to give them that kind of authority. A scrupulous broker, who is a successful broker, may at some point -- you may want to give that broker that kind of authority at a certain point, and say, just make the trades for me. You've made money for me.
But this is an area where you have to be very careful, and this is an area where you've seen the unhappiest investors. The ones whose brokers just traded their account.
HEMMER: I only have a few seconds left here. I've always been curious about this point, though. Do traders down on Wall Street right now have a palpable sense of a lack of trust or a lack of faith in the market?
ASNES: Of course they do. They're people too, and they can't ignore everything that's going around. And they have their money in the market.
So I think if anything, the professional traders are probably the people who are the most likely to look behind the rock and see if there are any bugs there. But, you know, we, even at "Money" magazine are very concerned about this. And, in fact, next week we are convening a summit of top financial CEOs to talk about these issues.
HEMMER: OK. We'll see what comes out of that. Marion, many thanks, OK?
ASNES: Great to see you.
HEMMER: On a Thursday morning, good morning again to you.
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