Home » Residents, financial community in disbelief over investigation of Fair Oaks financial adviser
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Residents, financial community in disbelief over investigation of Fair Oaks financial adviser

The news that a prominent Fair Oaks financial adviser, Thomas Hammond, is
under investigation for running a Ponzi scheme has been met with disbelief
by local residents and the financial and insurance adviser community.

The story was first reported by KCRA’s Mike
TeSelle http://www.kcra.com/news/27388390/detail.html on Thursday.

While most were not willing to comment publicly, those interviewed expressed
doubts that Hammond could be guilty of what federal investigators are
asserting, that he used investor money for his own purposes. Hammond is a
long-time resident and was president of the Fair Oaks Chamber of Commerce
until his sudden and unexplained resignation a week ago.

"This is going to give a black eye to many non-affiliated investment
advisers," said one financial planner.

Many advisers are part of a company, such as Edward Jones, or are
independent agents of large insurance and annuity companies. Insurance
agents and the representatives of the large wire-houses have to abide by
strict compliance regulations mandated by the companies and the state. Most
are paid a commission by the company or carrier they represent.

Others, like Hammond are "lone-rangers," who take client funds and invest
them as they see fit. They charge a fee based on the amount invested, called
AUM, or "assets under management." It is usually around 1.5 percent per
year. They do not get commissions for making sales.

Fee-based advisers claim that they are more independent and can give
unbiased opinions as they are not paid if a client decides to buy something.
Most require or are given discretionary powers by the client and are able to
do what they want with the money.

While commission-based agents and reps compete with fee-based advisers,
there is no one-size-fits-all approach. For most people, an insurance agent
and/or a stockbroker (known in the trade as registered reps) are best. For
very upscale clients, a fee-based adviser might be an advantage.

Insurance agents are far more constrained in what they are allowed to advise
clients on than stockbrokers, but both are far more regulated than
independent fee-based advisers.

"I’ve lived here for 29 years, and I simply can’t believe the allegations
against Tom,” said Alan Canton, owner of A.N. Canton Insurance Services, a
life, annuity and disability insurance agent in Fair Oaks. “He’s been a
pillar of the community, and I’m sure this is a big mistake."

While it is yet to be determined if Thomas Hammond is a local Bernie
Maddoff, at least the Fair Oaks community is willing to withhold judgment
until all the facts are determined.
 

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