Monday, November 30, 2015

A Former Financial Adviser's Unchosen Route To Independence

I created Alfidi Capital to be a research-only platform, which is fine by the SEC so long as I do not maintain fiduciary relationships, sell securities for third parties, provide personal advice or recommendations, or do other things that fall under regulatory guidelines. I considered going that traditional route at inception, and I quickly realized that doing brokerage or capital markets transactions were part of the things I did not like about working for other people. My thinking has not changed since 2008 and neither has my business model. I might as well lay out some of the thinking I did before turning away from the more common path to independence.

I first checked the regulatory requirements for a registered investment adviser (RIA). The SEC's basic guidelines for investment advisers point to its IAPD site for filling out its Form ADV. I reviewed that form and realized that it does not apply to me as long as I am not providing financial advice, selling financial securities, or maintaining custody of assets other than my own.

I reviewed the institutional platforms of several leading self-service brokerages. The platforms come bundled with custodian and clearing services, plus some optional things like independent research subscriptions. I would not be surprised to find social media services bundled with some platforms now, along with media archival systems that meet SEC compliance standards. I realized I did not need to spend money for such a platform if the only money I ever manage will be my own.

I checked FINRA's rules for the registration and qualification of advisory firms. There's a lot of things there to know for someone who doesn't handle compliance as a full-time job. I would have had to meet all of the compliance requirements like client correspondence recordkeeping, transaction auditing, keeping copies of advertising material, writing a compliance manual, using business cards with the state insurance registration number on back, etc. There are lots of independent SarBox consultants who charge big fees for this activity. I will always be too cheap to pay for anyone else's services. I did not want the operating expenses of regulatory compliance or an "RIA in a box" solution.

I needed an alternative to the overhead of an owned RIA platform. I briefly researched an arrangement where potential clients could custody their assets in a conventional account with a discount broker, but grant an adviser limited power of attorney to execute transactions and extract a management fee. That's the approach of at least one RIA in San Francisco. When I spoke to the local one I thought was a good model, I realized there was just no way to escape the potential problems of dealing with clients and regulators.

The administrative things that my former wealth management employer used to pay for like insurance, licensing, continuing education, etc. would have become my own expenses. I thought about finding CE requirements through a local chapter of the Financial Planning Association. The FPA is probably full of plenty of independent practitioners, and I had wondered if some older adviser would hand over a book of business prior to retirement. The window for such opportunities is rapidly closing now that discount brokerages are deploying robo-advisors with automated portfolio rebalancing. I would have wasted time buying into a dying business model.

All of my homework revealed that an adviser model would never work for me. Publishing general circulation research is consistent with SEC analyst rules and reflects my intellectual gifts. I have said before that Alfidi Capital does not perform financial brokerage and advisory services for others. There is no way this firm or I will ever conduct securities transactions and business with the investing public. I stand by my decision.

Sunday, November 29, 2015

The Limerick of Finance for 11/29/15

Cyber Monday is looking so good
Shoppers prefer online neighborhood
Retail sales pitches shift
Discount changes are swift
Stores would all sell online if they could

Saturday, November 28, 2015

The Haiku of Finance for 11/28/15

Christmas shopping start
People trample each other
They could have waited

Friday, November 27, 2015

Thursday, November 26, 2015

The Haiku of Finance for 11/26/15

Thank America
Freedom to think for one's self
No need to thank me

Giving Thanks For Stuff In 2015

Thanksgiving in 2015 means I get to watch the rest of America slack off and indulge. I did some of that too today but my brain is still engaged 100% in the genius of Alfidi Capital. It's about time that I recognized some recent inspirations for my genius and give them thanks.

I'll thank the steady drip of followers who add to my Web brand presence when they republish my content. Smart people know quality when they see it. I just can't help it when the raw genius radiates from my presence. Life is best when we fulfill our destinies.

I might as well thank a couple of recent critics who called me names on social media channels. They kept my Web brand in circulation for a few more media cycles. I really enjoy being the target of ill-informed, ad hominem attacks that feed my ego. The First Amendment gives every American the right to speak their minds. I am thankful that even small-minded people notice what I have to say.

I must especially thank a handful of female friends whose constructive feedback is helping me abandon my previous sexism. Careless word choices do have real negative impacts. I am now much more careful than I was earlier this year when commenting on gender subjects. Women don't need some random loudmouth stereotyping them into irrelevance when they deserve more in life. They do in fact need men as advocates who include them as equals, whether it's at the Thanksgiving dinner table or in the corporate boardroom. I have a lot of advocacy to do with the rest of my life.

In years past I've stated that the world should be thankful for my existence. I still see nothing wrong with that even if the world has no thanks to give me. It is unrealistic to expect much of the planet to think like me. I am still morally obligated to be true to myself. I can thank my favorite philosophers - Stoics like Marcus Aurelius and Seneca, plus Immanuel Kant and his Categorical Imperative - who reminded me how to live when I reviewed their works this year. My life is still my own, but my work should enhance humanity's moral worth.

Finally, I thank the Founders of our country who wrote the US Constitution and its Bill of Rights. The rule of law and the elevation of individual freedom enable me to run Alfidi Capital in a manner of my choosing. I could not have this type of lifestyle in other countries where busybodies, thugs, or authoritarians would silence me for speaking my mind. America is awesome and so am I. Happy Thanksgiving, America.

Wednesday, November 25, 2015

Tuesday, November 24, 2015

The Haiku of Finance for 11/24/15

Food selfie takers
Sponsors will pay promotion
Dinner makes money

Financial Sarcasm Roundup for 11/24/15

I should have blasted this out yesterday but cleantech thoughts kept me occupied all day long. It is better to be clean than dirty. Just ask any pig headed to the slaughterhouse.

Wall Street averages continue to rise in spite of global economic headwinds. Greater fools are always ready to rush into the top of a bull market. I have been waiting for these fools to get financially kneecapped for the past several years. The spectacle will be worth the wait. My cash will be ready when the top-buyers are all broke.

The Federal Reserve may raise rates in December, according to the consensus interpretation of its most recent notes. It's important to remember that the Fed can immediately reverse itself if a rate increase proves too explosive for the system's emergency brakes. Our mandarins are playing it by ear because they have enticed every investor to take on extraordinary risks. The first rate rise past 0.25% will test the yield curve's long end, and make long-duration bondholders wonder whether their portfolios are safe.

Some obsessive food selfie people have figured out that restaurants and other food service sector companies will monetize their food photos on Instagram and other social media sites. It's great that people who want us to know what they eat will make money from their idle habits. Eating is a natural function, so perhaps we can take other natural functions to their logical monetary conclusions. People who take shower selfies can sell Instagram advertising space to makers of soap and shampoo. Do I have to mention other bathroom functions? Don't make me go there.

I promised my cleantech contacts that I would clean up my act. I behaved myself this time around. My word is my bond.

Monday, November 23, 2015

The Haiku of Finance for 11/23/15

Startups pitch green stuff
Magic tech cleans the planet
Living the profit

Mastering The Cleantech Open Global Forum 2015

I have attended the Cleantech Open's events for three years now and I always come back for more. I had to jump into the CTO's Global Forum 2015 last week to see what this year's class of startups had done. Badge selfies are my bona fides because they prove I am not some AI bot randomly generating blog content.

Driving down to the CTO's home at GSVlabs is always worth my time. The co-working trend is now a serious thing. Startups eschew privacy and security by taking open-space collaboration to an extreme. I think the next trend could be co-working outdoors, where startups can plot their huge markets on picnic tables. Nah, just kidding. I wouldn't want to do office work outside because wild animals like bears and coyotes run around out there looking for people to eat. Smart VCs won't fund a startup where the founders risk getting devoured by packs of wild beasts.

The Investor Connect speed-dating round had a table reserved for yours truly, the CEO of Alfidi Capital. Someday I'll be #1 but this time I was at the #2 table. I am usually the #1 genius on hand wherever I go in life. Most normal people recognize this as soon as they meet me. Serious VCs and angel investors were at the other tables and I had the chance to interact with a few of them during breaks between meeting startups. Sharing insights helps me understand how much startups learn during their early phases.

I will share what I learned from the startups I met at my table. These are general impressions that cover many verticals. Addressing a scalable market means going after a big demographic whose price points and buying power are easily understood. Going after boutique markets with fragmented demographics (like organic farmers, for example) means a startup's marketing channels will be less efficient. Lowered efficiency in anything, especially finding a marketing channel, means a startup needs a longer runway to profitability. Proprietary technology must be difficult to duplicate. A simple device with common components is easy for a competitor to reverse engineer.

I also attended the CTO's Celebration Day in San Francisco's Herbst Theatre. It was my first visit to the Herbst since the Veterans Building's renovation. The drinking fountains on multiple floors actually work now after several years of inactivity. The downstairs bar looks pretty snazzy. Dag-nabbit, I should have taken photos.

The winners and finalists ran the gamut of tech. I heard pitches from startups doing biomass gasification, carbon nanotubes, pollution tracking, and SaaS analytics. I can't connect with businesses outside the United States because my personal prerogative is to only work with companies located in the US that American citizens own. I'm sure there are plenty of those to find.

Famed VC Ira Ehrenpreis gave his keynote that doubled as a highlight reel of his favorite investments. I'm pretty sure I heard him give this talk before at a conference down in Silicon Valley at least a year ago because I recognized many of the slides and themes. He told us that the best time for tech investing is right after a sector bursts its bubble, because the final survivors are in the best position to be long-term winners. I think the solar sector is still in the middle of its shakeout, so anyone making panels or modules after the last low-quality Chinese producer goes bankrupt will be in a sweet spot. I also think solar suppliers that adhere to all of the DOE EERE SunShot Initiative's standards will have an easier time convincing developers to include them in supply chains. Ira also mentioned the "second bottom line" importance of ESG criteria, another set of guidelines our aspiring startups must adopt if they want to attract impact investors.

I noted one concluding quote with interest: "There's no such thing as a bad contact, but there is such a thing as a bad way to follow up on a contact." Well, I had plenty of bad contacts when I worked in sales, and plenty more when I was between jobs trying to make a career for myself. There really are tons of bad people in the world and they succeed in spite of themselves. I avoid those types because I'd rather meet the ambitious folks populating the cleantech sector. If I get rich after investing in one of these startups, then I could finally afford to be a big-shot sponsor of the Cleantech Open.

Sunday, November 22, 2015

The Limerick of Finance for 11/22/15

Trading futures contracts is okay
For companies with cash to pay
Hedging the supply chain
Avoid volatile pain
Commodities always in play

Saturday, November 21, 2015

The Haiku of Finance for 11/21/15

Launching restaurant
Take a bite out of savings
Tasting sweet success

Restaurant Investing 101's Sustainable SF Bay Area Flavor

A dear friend recently asked me if I would ever invest in a restaurant. The restaurant sector isn't for me, and I don't personally know anyone who invests there, but it's a fascinating area nonetheless. I scoured the Web for some basic coverage of restaurant investing and the investors who make it work. Check out this 101 primer.

The National Restaurant Association should be the first stop for first-time eatery investors. The industry's clearinghouse reveals the inside scoop on managing a store. The search box turned up tons of articles on topics like "investment" and "sustainability," including the NRA's Conserve Program that's worth a look for potential owners.

I tried to find a link to the NRA's annual Restaurant Finance Summit. Instead I found Restaurant Finance Monitor, which runs its own finance and development conferences. Capital sources populate the Monitor's finance and real estate directory. I don't have time to read through their white papers but the ones on sale-leaseback financing and restaurant valuation look especially useful for investors.

Not every source is as authoritative as the restaurant industry's official organs. The Wiley "For Dummies" imprint has a bunch of articles on food trucks, but of course the dining sector is much larger than what rolls on streets. Searching the Dummies brand for "restaurant" turned up tips on menu selection and social media marketing, plus many irrelevant topics. I sought wisdom at and found mostly anecdotal articles touting "industry insights" rather than the hard research and checklist an owner-operator needs. Gourmet Marketing's learning center has some decent tips on investor due diligence and critical management numbers, but I would prefer to see those suggestions populated with industry data.

Owner-operators have a wealth of prospecting sources thanks to the digital economy. AngelList has thousands of self-identified restaurant angel investors. It is difficult to tell at first glance which ones are still active or have successful investments. Some AngelList people don't mind being prospected because that's how they vet new ideas. EquityEats is a crowdfunding platform specifically for restaurateurs raising seed capital for their first storefront. The good news for all startups, including eateries, is that the SEC is liberalizing rules on crowdfunding right now. Non-accredited investors will soon have many more crowdfunding options available, and entrepreneurs will have more channels to raise capital if they have good legal counsel to keep them compliant with the SEC's JOBS Act rules.

Non-profits like to help with restaurant incubation, at least here in the SF Bay Area. La Cocina focuses on assistance for restaurant owners in disadvantaged demographics, but their resources page includes planning and financing sources invaluable to any restaurateur. Forage runs another Bay Area kitchen incubator and promotes sustainable dining through its supper club.

Speaking of sustainability, it now matters in retail dining. My San Francisco blog coverage must include the local scene's sustainable dining culture. The Center for Urban Education about Sustainable Agriculture (CUESA) covers everything from farm to table. Entire dining supply chains can now be sustainable. The trend towards sustainability also gets national notice. Full Service Restaurants has detailed coverage of sustainability developments. The Center for Food Integrity and its CFI ENGAGE Resource Center offer a national perspective on food supply chain quality. Entrepreneurs launching a sustainable dining space need the seal of approval that comes from participating in these programs. Earning a B-Corporation designation probably helps show a restaurant's commitment to a sustainable philosophy.

There's a lot here for a restaurant owner to digest, no pun intended. San Francisco investors like to see sustainability when they perform due diligence on potential investments in any category, based on what I've gleaned from attending the Bay Area Impact Investing Initiative's (BAIII) events. The federal government is getting into the act with the SBA's sustainable business practices for small firms. It's all food for thought . . . again, no pun intended.