Ray Lucia fined and banned

[MichaelB]

From Reuters U.S. SEC fines, bars 'Buckets of Money' radio host for fraud | Reuters

(Reuters) - The Securities and Exchange Commission on Monday fined a radio personality and his financial advice firm $300,000 for spreading misleading information about his signature "Buckets of Money" investment strategy.

The SEC administrative law judge in the case also barred San Diego-based syndicated radio host Raymond J. Lucia Sr. from associating with other advisers, brokers and dealers, and revoked his eponymous firm's investment adviser registration.

We knew he was in trouble from this thread last year http://www.early-retirement.org/for...-hole-in-buckets-of-money-strategy-62896.html

 

[REWahoo]

.My Bucket's Got A Hole In It-Hank Williams - YouTube

 

[HighRoller]

Makes me wonder how many of these guys (or firms) are out there. We all hear about the big names but there are some smaller ones that never make the news. I do know of a couple of individuals that were banned, fined or sent to jail over the years for their investment advice/tactics but they never made the "national news'. I guess it's like any other profession. There are good guys and bad guys.

 

[teejayevans]

I tried to download his radio show to see if he made any comments, but his show archive seems to have been removed, he is not on in my area, he is still on the air??
TJ

 

[REWahoo]

This link indicates you can download his program broadcast yesterday.

EDIT: When you attempt to download you get an error message...

 

[teejayevans]

This link indicates you can download his program broadcast yesterday.

EDIT: When you attempt to download you get an error message...

That's what I was saying...all the past links error with not found.

Here is another article link:
Lucia

I love the quote "The dog ate my homework defense"

TJ

 

[ERD50]

We knew he was in trouble from this thread last year http://www.early-retirement.org/for...-hole-in-buckets-of-money-strategy-62896.html

Thanks for that link, I may have missed it the first go-around. Great summary and follow-up by donheff:

Link to post

As I recall, some bucket enthusiasts were asking for an option to model that in FIRECALC. I don't think any came even close to agreeing/defining a methodology that could be coded. That was a red flag to me.

Seeing how you could end up with a very high AA after a long downturn - it just seemed like any real back testing would end up getting into cherry-picking/data-mining territory. You could say that about any simulation I guess, but I don't think more generic rules like annual re-balance are quite so subject to data-mining.

-ERD50

 

[Mulligan]

I tried to download his radio show to see if he made any comments, but his show archive seems to have been removed, he is not on in my area, he is still on the air??
TJ

When I travel to visit friends, out in the lonely outback he is on at times on one of the few radio channels I can get. He can be quite humorous. They butchered a call last week badly. A caller asked which should he sell first his IBonds purchased in the past few years or EE Bonds purchased over 10 years ago. They first said the EE Bonds because they are paying a current lower interest rate than IBonds. Then about 10 minutes later it hit them that maybe those older EE Bonds had a better return than the current ones. They never mentioned that the EE's held to maturity had a way higher rate than the current IBonds.

 

[rodi]

The show was still on the air here in San Diego last Friday. (I listen on my way to Costco each week.)

A coworker signed up with them when his wife inherited some money. They've since moved most of their money - but are having trouble getting their REIT money back. It's about as illiquid an asset as can be.

I suspect he'll continue to find a way to make money.

 

[NW-Bound]

I am not a follower of Lucia, but have listened to him a dozen times on the radio when I happened to be driving during the broadcast.

I thought that he and his cohort were knowledgeable when they answered some tax or legal questions. Heard about his bucket strategy, but kept forgetting to follow up to learn more.

Now, l learned that he never did have a BucketCalc!

I wonder if his sin in selling bad REITs might be more severe, but perhaps the SEC could not pin it.

 

[youbet]

Lucia is an extremely effective salesman. We had numerous threads here where folks who had bought in on his pitch argued passionately that Ray's bucket system was unique and different than going with a similar AA and withdrawal strategy but without the "buckets" jargon.

My main concern for folks following Ray's strategy was the possibility of moving to an extremely high equity allocation late in retirement.

I'm not surprised to hear that he devised back testing schemes aimed at selling product rather than accurate testing.

 

[haha]

Lucia is an extremely effective salesman. We had numerous threads here where folks who had bought in on his pitch argued passionately that Ray's bucket system was unique and different than going with a similar AA and withdrawal strategy but without the "buckets" jargon.

I imagine poor Ray, if he is reading this, may be saying , "hey I thought you guys liked me!" The bucket premise is no dumber now than it was then. If the SEC starts banning every promoter of nonsensical schemes who has done some quack research, not many will be left in the business.

Ha

 

[frayne]

Just reinforces the fact that the financial advisor industry has more than its' share of snake oil salesmen ready to take your money. Nothing new but all the more reason to DIY. Just my two cents.

 

[youbet]

If the SEC starts banning every promoter of nonsensical schemes who has done some quack research, not many will be left in the business.

That's for sure!

Despite my favorable initial reaction to hearing this news about Ray's unfortunate outcome with the SEC, I also wondered what the SEC's strategy is. Pick out someone with a bit of a celebrity status, skin him alive, and see if the small fish get the hint? It reminds me a bit of the Martha Stewart case.

 

[Brat]

I found his approach, generally speaking, sensible. His REIT was self serving and as others mentioned illiquid - thus stinky advice. It doesn't really get to asset allocation in the sense of bonds, equities, US vs International.

His first book set out the basic formula.. liquid cash equivalents for x years (to accommodate MRDs and market downturns) are the first bucket, investments for the intermediate term feed the first bucket, then growth investments for the long term are in the third bucket. You enter your assumed return for each bucket. I never felt I had to accept his definition of each time period but it did help me to give structure to my investment plan. For example my Roth accounts belong in the long term bucket. If long term is underfunded then I need to look at my holdings in the intermediate bucket.

 

[Rich_by_the_Bay]

The more I heard him the less I liked him, ultimately dropping his show altogether a few years ago. I was a supporter of the bucket metaphor until I put it into personal use and saw its rigidity and "an answer for everything" look and feel. There were logical flaws which I found troubling as I became more knowledgeable. Finally I became distrustful of his advice and moved on.

But I admit the bucket thing helped me understand certain concepts which helped me out.

 

[veremchuka]

I heard of Ray but never heard him speak.

Who would buy non-traded REITS? I was pitched this when getting a free financial review locally when I retired, just curious more than serious. When I heard the non-traded REITS were illiquid and paid about 7% I knew something stunk. My guess you get your principal back and not any real income plus you can't really sell them unless the company would buy them at a substantial discount. I was polite at the meeting and threw the brochures in the trash after reading them at home.

 

[youbet]

I found his approach, generally speaking, sensible.

Not to relive all the "Ray Yes! - Ray No!" threads of the past, but didn't the possibility of an elderly person, with the bulk of their portfolio spent, having an extremely high equity allocation due to following Ray's methodology seem less than "sensible" to you?

It's not the way I'd go. Of course, there's no way we'll ever know for sure how following Ray's methodology would have worked out for each of us. Maybe he was right.........

 

[FinanceDude]

He and Suze Orman would make a great pair...........

 

[teejayevans]

Lucia is an extremely effective salesman. We had numerous threads here where folks who had bought in on his pitch argued passionately that Ray's bucket system was unique and different than going with a similar AA and withdrawal strategy but without the "buckets" jargon.

My main concern for folks following Ray's strategy was the possibility of moving to an extremely high equity allocation late in retirement.

I'm not surprised to hear that he devised back testing schemes aimed at selling product rather than accurate testing.

I believe in the basic approach of having a bucket of money that you can live off that is will not be affected by a major market downturn.
But he made it complex and started adding expensive products, he stated many times that non-traded REITS are like bonds on steriods. To prove his point he would start with "let's say....", and then would pick numbers that clearly made this point, he did this all the time, and I think that's what got him into trouble.
TJ

 

[teejayevans]

He and Suze Orman would make a great pair...........

No, Suzy is doesn't understand personal finance at all, Ray does, he just too much "car salesman" for me. Also has a major ego, which rubs me the wrong way, of course that may be a requirement for being a radio host.
TJ

 

[youbet]

I believe in the basic approach of having a bucket of money that you can live off that is will not be affected by a major market downturn.

My FIRE portfolio is diverse and contains some assets that are stabile and liquid. Those would be available to me in a market downturn that turned everything else into strong "holds." But I'd never consider keeping money in a bucket for that situation........

 

[Sue J]

Just reinforces the fact that the financial advisor industry has more than its' share of snake oil salesmen ready to take your money. Nothing new but all the more reason to DIY. Just my two cents.

I recently read this book -

Amazon.com: Pound Foolish: Exposing the Dark Side of the Personal Finance Industry eBook: Helaine Olen: Kindle Store

It reminded me that just about anyone who is making a living "helping" others with their finances has an agenda and a profit motive. Interesting read. She has criticism of just about every money guru I had heard of and some I hadn't heard of including, Suze Orman, Dave Ramsey, Jim Cramer, Jean Chatzky, Robert Kiyosaki, David Bach.

The link is to the Kindle version but I borrowed an actual hardback copy from the library.

 

[brett]

If he is really that great he would not be working a radio program.

 

[donheff]

The more I heard him the less I liked him, ultimately dropping his show altogether a few years ago. I was a supporter of the bucket metaphor until I put it into personal use and saw its rigidity and "an answer for everything" look and feel. There were logical flaws which I found troubling as I became more knowledgeable. Finally I became distrustful of his advice and moved on.

But I admit the bucket thing helped me understand certain concepts which helped me out.

Yeah, I went along the same route. I still maintain a cash reserve (bucket) as do many here to use in a downturn to give equities time to bounce back. What I never liked about Lucia is that he would not articulate a strategy for when to withdraw from cash and when to refill. In other words no re-balancing strategy. I still struggle with when and from which accounts to liquidate for expenses.