While municipal yields have risen recently, offering more attractive tax-free returns, investors should be forewarned that the price they are paying may not be fair value. Price markups, the difference between a broker’s cost and the price the end customer pays, can be excessive and very costly to the investor. A recent Wall Street Journal article highlighted a study conducted by the Securities Litigation and Consulting Group in which 14 million trades were analyzed for markups between 2005 and April of this year. The study showed that for “one out of 20 trades, people who bought $250,000 or less in municipal bonds paid a markup of at least 3.04%,” given today’s rates that’s equivalent to approximately a full year’s worth of interest income. SLCG estimates that investors forked up in excess of $10 billion in excessive markups since 2005. At SNWAM we have relationships with over 80 brokers with whom we purchase bonds for our clients. This allows us to be selective when assessing offers and gives us greater leverage to negotiate the best possible purchase price. When we purchase a bond for a client it enters their account at the same price we paid, free of mark-ups. This is because we are a fee-based manager who does not benefit from price gauging our clients. Our portfolio managers are constantly evaluating fair and relative value for each security they purchase, and strive to achieve the best execution for our clients on each trade. As a result our clients are able to invest in securities at the wholesale price, resulting in a higher portfolio yield than would be possible if the investor was purchasing bonds themselves. This is just one of the many ways we add value to our client accounts.