Why are Fisher Investments so fishy about their auditor?

24 May

Fisher investments in their own words are a multi-billion dollar company and one of the world’s largest independent investment advisory firms. They have approximately $40 billion under management. Given the events surrounding Bernie Madoff, the investigations into SAC Capital, the trial and prosecution of Raj Rajaratnam and other hedge funds, financial firms should be pursuing every effort to ensure they are at least perceived to be wholly transparent.

In this spirit I contacted Fisher Investments in order to identify who their auditor was for the last financial year. As a private legal entity they are under no obligation to do so.  After speaking to a number of people I was told by a very polite female Media representative that she would find out and give me a call back. She duly did and apologised that she was not able to release that information but if I had any other queries she would be happy to help.  Given their hesitancy, one has to question whether the release of such information would be material and business sensitive. It is likely that Fisher employs one of the major auditing firms but without such knowledge it is difficult to speculate accurately.

One of the key clues that the investment world missed with Madoff was his illusive one-man band auditing firm.  Ken Fisher doesn’t really see a problem whatsoever with employing one-man band auditing firms for multi-billion dollar enterprises. In Fisher’s book, ‘How to Smell a Rat: The Five Signs of Financial Fraud’ he says (under the section, The Myth of the Tiny Auditor):

“The SEC, a professional intermediary,  a friendly referral-none are rock-solid protections against fraud. And neither is a professional audit-not necessarily-but not for the reasons many think. Many early news stories whacked Madoff and Stanford for using small, no-name auditors. It was easy for folks to poke fun at the auditing firms, described as “tiny,” “three-man shops,” and “dingy.” Some described the measly square footage of the offices or the back-water towns they were in.

But a small auditing firm isn’t a negating factor. Why? We don’t know what those “small” auditing firms were auditing! Auditing firms audit any number of things. Just because someone contracts an auditor doesn’t mean that particular auditor is vetting performance or the assets. It will come out in the legal process, but for now, it appears, at least in Madoff’s case, the auditor wasn’t contracted to audit performance but, rather, financial solvency.

So shouldn’t their small size automatically be a red flag? Still no. Because even a big-firm financial audit isn’t rock-solid protection against fraud.”

Fisher then proceeds to explain how major firms including Enron, Lehman and others employed one of ‘The Big Four’ and yet were able to fool them into signing off their accounts.  What Fisher doesn’t appreciate is perception and reputation. Major firms despite their shortcomings house some of the most innovative and effective thinkers within the industry. Small firms are not equipped to digest the complexity of a large enterprise like the Madoff Ponzi scheme or Fisher Investments for example. While it is agreed that the auditing/accountancy space needs to be widened to incorporate other players outside ‘The Big Four’, using obscure and remote auditors is nonetheless unwise. Analysing empirical data would also indicate that the vast majority of financial fraud involving companies, auditors are typically sourced from smaller firms.  

What surprises me the most regarding Fisher Investments is the rampant and aggressive way it litters its advertising machine across the web. I guarantee that every reader has witnessed some aspect of their advertising. Here are a couple clustered across some top-tier financial websites and Fisher’s own website:

24-7 Wall Street

 

Zero Hedge

Looks like a replica penny stock pump and dump.

Exclusive – “analysis you won’t find anyplace else. Don’t miss it!”

Teaser rate anyone?

Double whammy on Forbes!

This dude has been spammed all over the internet!

For an investment firm managing $40 billion dollars of institutional and private client assets their marketing ads are sketchy and would under most circumstances raise suspicions. They are more akin to those one would see across retail penny stock forums and general uncategorised spam; you know, the Viagra sellers and the 24hr weight loss ads.

Browsing through the web there also seems to be a distinct lack of disclosure regarding Fisher’s past performance. It is also interesting to note  that searching through Fisher’s various websites in search of performance-related data you are simply referred to a number of external websites, which, again give no indication of investment performance. Tracking or validating past performance should not be a troublesome exercise, these details should be transparent and visibly available for investors so that they can appropriately make decisions, which impact their savings and pensions. Retirees and seniors are entrusting hundreds of thousands of dollars that have been earned through decades of toil and sacrifice. Investors deserve that money managers’ like Fisher oblige by their fiduciary responsibilities and protect client financial assets appropriately.

There was also a case circling the courts of an elderly couple (detailed here) alleging Fisher Investments breached their fiduciary duty and that losses of approximately 50% were sustained. To keep it short, do your own research and due diligence.  I for sure would never invest with Fisher Investments.

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2 Responses to “Why are Fisher Investments so fishy about their auditor?”

  1. libra June 7, 2011 at 1:33 am #

    fisher’s so called “vice presidents” aka highly aggressive salepersons, made 2 runs at me–the 3rd visit–they sent the big guns TWO OF THEM and i wavered and signed. spring of 2007. he sold off the utilities and blue chips that were in the acct. i gave him to manage–amt. tax was the result..the stocks he bought in its place was a portfolio filled with banks, financials, pink sheet stuff and other crap–all time highs were paid. he was fully invested until it was time for his quarterly draw,many of the trades HE MADE IN MY ACCT WERE BOUGHT HIGH AT THE TOP AND SOLD LOW. you are told that you will have a personalized portfolio but his accts were cookie cutter and not geared to the person and their particular circumstance. fisher was running an unregulated mutual fund. the rock needs to be lifted and light shone on his operation.

  2. The Cognitive Dissonance.com June 7, 2011 at 6:46 pm #

    Thanks Libra for this information. I think more people like you need to educate people about the practices of Fisher Investments. You are not alone, there is a growing number of personal investors who have experienced the same fraudulent practices that you have described.

    I have already contacted the SEC to investigate Fisher Investments and to address some of the concerns I have raised. As expected, telephone lines are always engaged and when you do get through to someone you can appreciate why fraud is so prevalent in the investment banking industry. I have left an answer phone message. Ken Fisher needs to release performance data and stop promoting his company in such a shoddy way. The fact that you were aggressively sold to is disgusting! We need to keep this conversation going across the web until the media and regulators pay attention. I will keep you updated on any progress I make.

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