Are my Assets Safe?
During these times people are wary of their investment relationships, and rightfully so. Innocent investors victimized by crooks posing as investment professionals along with irresponsible behavior by trusted officials betrayed people’s trust and destroyed years of careful saving. These circumstances have caused people to have doubts about the entire financial system. To help address client concerns, we have outlined a number of important considerations regarding how we protect client assets.
How Inner Harbor Advisors is different from the firms involved in these scandals:
1. As an independent advisor, we do not have the ability to hold client assets on our books, nor do we have full power of attorney over clients’ assets. We only have the ability to affect trades in client accounts, charge advisory fees, and request checks payable to the client to be sent to their address of record.
2. We are not affiliated with the custodian or the brokerage firm that holds your investments or handles your trades. We are a clearing correspondent of Pershing LLC, where all of our client accounts are held in custody. Pershing LLC is owned by Bank of New York Mellon which is the oldest bank in the country and the largest asset custodian in the world with over $20 trillion in assets. Because of our clearing arrangement, there are 3 layers of independent regulatory oversight, 3 layers of independent control, and 3 sets of financial reporting.
3. If something unforeseen should happen to BNY Mellon, each account is insured and we can move our client accounts to another clearing firm, if necessary. If something goes wrong at our firm, Pershing can step in and move the client accounts to another firm without disruption.
4. Clients receive a full statement of positions, balances and account activity monthly or at least quarterly from a source that is not affiliated with Inner Harbor Advisors. Hedge funds do not have the same requirement.
5. As members of the Securities Investors Protection Corporation (SIPC), our client accounts are covered by insurance protection up to $500,000 including $100,000 for claims of cash. In addition to SIPC account coverage, we have excess coverage from Lloyd’s of London to protect client assets up to an overall aggregate level of $1 billion for assets in custody, including up to $1.9 million in cash awaiting reinvestment per client account. This provides the highest level of protection available in the industry today.
6. We do not operate a “financial supermarket” or wirehouse brokerage company, where one division can bring unforeseen risk to the whole firm. As a result of our size, we can be more responsive and flexible, and this actually affords clients additional protections and benefits.
7. Many of the large firms that have recently experienced problems had or have very complicated portfolios. Their balance sheets can look fine one day, but they could be bankrupt the next. In the case of some of the big wirehouse firms, it seems no one really knew what the risks were. They run complicated business operating as both custodians and investment bankers. By contrast, the simplicity of our business limits risk. We don’t have any debt. We do not have any position trading accounts or proprietary inventory in illiquid investments nor do we make markets. In short, we don’t have any investments that could “blow up” and jeopardize our clients and our company.
8. We do not have outside shareholders pressing for new and increasing sources of revenue. Inner Harbor Advisors LLC is entirely owned by the two founders, John O’Meara and Michael Keating. We are focused on serving our clients only. If our clients are happy, we are happy.
Please feel free to contact either John O’Meara or Michael Keating if you have any questions or if you wish to discuss this matter further.