Welcome to The Quarterly Report from Iron Capital. This is the first issue of what I hope you will find to be an interesting and informative investment newsletter. I must admit to being nervous as I began to write this first article for our first newsletter – strange, since I used to have my own column in an industry trade journal, and have written countless market commentaries. I now realize that writing on behalf of your own firm is different, because it’s personal. In future issues we will use this space to share our views on investing your assets in the current market environment, but I want to take this first opportunity to tell you the Iron Capital story.

We formed Iron Capital Advisors in 2003 when I left INVESCO Retirement and partnered with Larry Gray, founder of Gray & Company, to start a firm that conducts business in what I believe is the “right” way. Iron Capital is more than a firm to me; it’s my dream. Throughout my career, as I worked my way up through the investment industry, I was constantly disturbed by two major flaws:

1) the industry is ripe with conflicts of interest, and
2) the end investor often has no access to expert advice or guidance. The final straw occurred when we all witnessed too many people lose half or more of their assets in the bear market of 2000– 2002. I felt I had to do something to help, and from that desire, Iron Capital was born.

Our mission at Iron Capital is to provide truly independent, customized investment counsel and portfolio management to retirement plan sponsors, participants, and individual investors. We accomplish this by adhering to certain principles that I believe are largely missing in the financial industry.

First, we believe in independence. One cannot serve two masters; you cannot have the client’s interest at heart if you are getting paid by a third party. This may sound obvious, and you would think that no-one would take advice from someone who is getting paid by someone else. However, people seeking financial and investment advice do it all the time. Most investors get advice from someone who is paid by the institution whose products or services they are selling. Their titles are usually Financial Planners, Financial Advisors, Financial Consultants, Wealth Managers, or if they are old-fashioned they will still call themselves Stock Brokers. Regardless of title, the reality is that they are all salespeople.

There is nothing wrong with salespeople, as long as they are honest about what they do and where their financial interests lie. Historically the stock broker’s job was not that of an advisor, but rather to bring buyers and sellers together to execute trades for a commission. Over time, as technology has made trading easier and more efficient, brokers have started offering advice. Today, the stock broker or “financial advisor” role is like that of a pharmaceutical sales representative. Pharmaceutical sales reps, like financial advisors, are professional, generally well-educated and trained by their home office to understand the products they represent. They know how the drugs work and benefit patients, and if a doctor asks an unusual or difficult question, they call the home office and consult the scientist who created the drug to answer the doctor’s question. Pharmaceutical sales reps are good people who believe in the products they sell, but you don’t go to one of them when you are sick.

Financial advisors are good people who believe in the products they sell, but going to a financial advisor to help you build an investment portfolio would be like going to a pharmaceutical sales rep when you are sick. Financial advisors work for the brokerage firm and cannot recommend any product that is not on their firm’s platform. In addition they aren’t investment management professionals. Very few have either the education or investment management experience that would qualify them to create and manage a portfolio.

The second principle we live by at Iron Capital is trust. Trust denotes honesty and integrity, but it also goes one step farther for us. Our clients trust that the professionals at Iron Capital are making the best possible investment decisions, based on investment management knowledge and experience. Every investment decision is made with only the client’s interest at heart by professionals who have extensive investment industry experience – each of us has been that “scientist” in the home office who actually created the product.

Due to that experience, we understand that the key to investment success is following a disciplined process. We work with our clients to create custom investment policy statements, identify the appropriate asset classes to be represented within the portfolio and select the right investments to represent each asset class. We allocate their assets across those investments and monitor the portfolio for adherence to the strategy spelled out in their investment policy. We can do this because, at Iron Capital, you are dealing not with a salesperson but rather directly with an investment professional.

My desire in creating this firm was to provide conflict-free, professional investment counsel. I felt the time was right, and that there were enough people out there who realized that the old way of doing business was broken. Two and a half short years later, Iron Capital now advises more than four billion in assets. There must be something to our approach.

So that is our story. I hope I have communicated who we are and why we created this firm. If you are tired of the old way of doing business, please give us a call. We are your gateway to independent investment advice.

We will be in touch next quarter with some true investment insight. In the meantime, buy low, sell high, and if you take investment advice, make sure it is coming from someone with real investment management experience who has only your interest at heart.

CHUCK OSBORNE, CFA, Managing Director

~The Iron Capital Story