Twickenham Advisors – Shady Disclosures and Past
Twickenham Advisors is the Huntsville branch of Hightower Advisors and is run by WF Sanders Jr and John Wesley Clayton (Wes Clayton).
Every business has its flaws and this fiduciary firm is no exception. Hence, before you start investing with them and risk your financial future, it would be best to understand what are the primary issues present with them.
The following points will give you an overview of the primary red flags present in this company. It would allow you to make smarter decisions on this matter:
About Twickenham Advisors:
Twickenham Advisors is a financial consultancy firm based in Huntsville, Alabama. Their address is 100 Church St SW STE 625, Huntsville, AL 35801, US and their contact number is 256-213-1150.
They are affiliated with Hightower Advisors. The firm offers services to individuals, families, institutions and corporations. The founders of this firm are WF Sanders Jr, John Wesley Clayton and Henry Moss Crosby, Jr.
Leaders of this firm have accumulated several prominent accolades and awards. For example, the founder of this firm, Henry Moss Crosby, Jr ranked #1 in Alabama on Forbes’ 2021 Best-In-State Wealth Advisors.
But financial consultancy firms tend to use these accolades to distract investors from the actual problems.
This advisory firm claims to offer financial advice and investment guidance as true fiduciaries. However, there are several prominent red flags present in this firm.
$138,000+ Dispute Against Wes Clayton
Wes Clayton is a co-founder, partner and managing director at Twickenham Advisors. As a leader of the firm, he holds a strong position on how things happen and what kind of services a client receives.
If you look at Wes Clayton’s track record, you’d see a dispute present on his FINRA BrokerCheck page. The dispute was filed in 2004 by a disgruntled client for “being inappropriately invested” between 12-31-2000 and 05-01-2004.
While the claim was denied for unknown reasons, the requested damages were $138,070.00.
It’s important to know what disputes your fiduciary faced in the past as it gives you an idea of how reliable they are. In the case of Wes Clayton, facing a $100,000+ dispute is a prominent red flag.
However, if you dig deeper and look into the fees and practices of Clayton’s firm, you realize there are a ton more issues present within this firm.
Below are a few red flags present in the disclosures of this fiduciary. They will help you understand if you can trust them with your investments or not.
Problems in Twickenham Advisors
Apart from having a conflicting past, this fiduciary also has several ethical issues in its disclosures. It’s vital to know about these issues before you hire them as your advisor. Understanding their conflicts of interests will help you determine if you can truly trust their recommended investments or not.
Moreover, there are a ton of them:
They are a Broker-Dealer
The first conflict of interest present in their disclosure is that Twickenham Advisors are broker-dealer. This can lead to a ton of additional issues as it means they earn commissions from certain investments.
A financial advisor’s job is to help you find investments that match your financial goals. But when the advisor has an incentive to promote certain investments, it can cloud their judgment.
The primary focus of your investment advisor can easily shift from your interests to their profit. That’s never a good thing for the client, i.e., you.
If you’re already a client of Wes Clayton or his firm, it would be best to review your investments and ask how much commission they earn.
Offer Mutual Funds with 12b-1 Fees
Another prominent issue in Wes Clayton’s services is that his firm offers mutual funds with 12b-1 fees. It’s a marketing fee that usually goes into the pocket of the advisor.
Not only does the fee increase your total investment cost, but it also doesn’t provide any benefits for its increased prices. SEC has researched to compare the returns of mutual funds that charge 12b-1 fees and the returns of those that don’t. The research found that there wasn’t any difference in the returns of both mutual funds.
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In fact, the returns of mutual funds with 12b-1 fees were lower because of the additional fee.
This is a huge drawback of working with Twickenham Advisors. It doesn’t matter if they are the Huntsville branch of Hightower Advisors, paying high fees for no returns is a terrible deal.
They Accept Performance-based Fees
Investment advisors charge different kinds of fees and the most notorious type among them is performance-based fees. When a financial advisor charges a performance-based fee, he makes money only after he outperforms a benchmark like an index.
It seems like an attractive pay structure but it’s very dangerous. Performance-based fees incentivize your advisor to pursue high-risk strategies. Due to the high-risk nature of such strategies, you can easily lose most if not all of your investment.
A study found that mutual funds with performance-based fee structures took unnecessary risks and offered poor results. Such strategies are particularly dangerous in a down market.
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Also, the SEC permitted advisors to follow this fee structure in 1985 because prior to that, Congress had banned it through the Investment Advisers Act for RIAs in 1940.
This advisory firm charges a performance-based fee which means they have an incentive to put you at extra risk. If you’re an investor who wants a low-risk or medium-risk portfolio, Twickenham Advisors might not be suitable for you.
Perform Side-by-Side Management
Wes Clayton and his firm perform side-by-side management. This means he might favor larger funds, leading to unfavorable trade executions and costs for retail clients.
Side-by-side management can have an adverse effect on the service-quality of your advisor. It’s quite common for a fiduciary to offer subpar advice to its smaller retail accounts to save time and effort for the larger funds.
They Accept Soft-Dollar Benefits
Another issue with this advisory firm is it accepts soft-dollar benefits. These are highly notorious in the finance industry because they make it much easier for an advisor to exploit their client.
Advisors that accept soft-dollar benefits tend to push trades through brokers that offer advantages to their own firm rather than their client. Like the previous conflicts of interest, this one also adds bias to the advisor’s recommendations, making it difficult to trust them.
Trade Recommended Securities
This means that Wes Clayton and his firm trade the securities they recommend to their clients. It can lead to multiple ethical issues as the advisor can use their clients’ funds to manipulate the returns for themselves.
What’s worse is that the clients are usually unaware of this happening.
A common example is front running. Here, the advisor trades certain securities and then recommends them to the investor to get better returns for himself.
Trading recommended securities can greatly influence an advisor’s recommendations. He might even ignore the client’s interests and focus on increasing his own returns.
Avoid Wes Clayton and Twickenham Advisors
After going through the various conflicts of interest present in this firm’s disclosure, it’s obvious that you can’t trust Twickenham Advisors. They might have multiple accolades but that doesn’t undermine the fact that its founder faced a $100,000+ dispute in the past.
It also doesn’t undermine the various ethical issues surrounding this firm. For example, can you trust an advisor that makes money by putting you at unnecessary risk?
Due to these reasons, it would be best to avoid working with this firm.
Twickenham Advisors have a shady past and terrible policies in their disclosures. Their commission-focused business model might help them make a few extra bucks but they come at the expense of the clients’ returns. Due to the numerous conflicts of interest present in their disclosures, they are not recommended.
- Have plenty of accolades
- Earn more when put clients at unnecessary risk
- Leadership has a shady past
- Accept soft-dollar benefits
- 12b-1 fees conflict