Celebrity status not a qualifier

By DAVID MOON, Moon Capital Management, LLC
November 3, 2013

Bambi Holzer is chairman of Wealth & Income Management in Beverly Hills. She has been featured on the Today Show and in the pages of USA Today. A photo of her and Pope John Paul II hangs in her office.

Her clients include some of Hollywood’s most recognizable names.

That celebrity, however, belies a history of compliance problems that should have been obvious to even the most casually curious potential client.

But not former Seinfeld star Julia Louis-Dreyfus.

Dreyfus, along with her husband William Bradford Hall, purchased certain annuities that Ms. Holzer explained would, at a minimum, provide a seven percent annual return.

What Ms. Holzer failed to mention to the couple, however, is that the seven percent return was only guaranteed at death.

Holzer, preferring to be considered incompetent rather than unethical, defended herself by claiming that she honestly explained the annuities—as best as she understood them.

Her employer at the time, UBS, and the annuity issuer, ING, eventually settled with the couple, without disclosing the terms of the settlement.

UBS did disclose the terms of its settlement with another former Holzer client and Hollywood star, Donna Mills: $1.4 million.

Forbes reports that Holzer and UBS paid more than $11 million to settle numerous claims arising from her eight years of employment at the firm.

Ms. Holzer’s disciplinary record with the Financial Industry Regulatory Authority (FINRA) is 112 pages long. It is the largest FINRA disciplinary report I have ever seen. The report details more than 60 violations dating at least back to 1991, finally culminating with a suspension of her license last month.

It was at least the third suspension of one or more of her licenses.

Yet presumably sophisticated people continued to hire her.

Holzer has been fined for professional misconduct. Her employers have paid fines, fees and restitution resulting from claims of negligence, fraud and churning.

Over the past 30 years, Ms. Holzer worked for 10 different firms. Some allowed her to resign while under investigation. At least one fired her.

After leaving UBS, Holzer went to A.G. Edwards, where she was fired two years later. She eventually landed at Wedbush Securities where, according to the Securities and Exchange Commission, she graduated from misrepresenting annuities to promoting an eventually worthless Ponzi scheme.

Holzer’s lawyer, Rex Beaber, was quoted in a Reuters article claiming that Holzer’s investors were highly successful people who knew the risks they were taking.

I’m guessing that Ms. Holzer did not disclose that the purported 18 percent annual returns were the result of a fraud.

I know of situations where, despite losing millions of dollars in their own private investments, individuals are able to use the power of their popularity to posture themselves as investment experts, when their personal experience demonstrates financial incompetence.

Anyone is capable of using celebrity to create the illusion of competence.

But being a celebrity is no qualification for either being or choosing an investment adviser.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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