National Association of Investors Corporation

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National Association of Investors Corporation (NAIC), also known as BetterInvesting, is Michigan based 501c3 non-profit organization (since the mid 1998, where prior it was a for-profit organization) whose aim is to teach individuals how to become successful long-term investors. The NAIC is an umbrella organization with around 16,000 member investment clubs, and approximately 120,000 individual members.^[1]Membership has been in a steady decline since a peak of well over 400,000 in 1999.^[2]

NAIC, not be confused with the National Association of Insurance Commissioners, is the legal name of the organization. Its member magazine is called BetterInvesting (no space) and it became the branded name of the association in 2004. NAIC/BetterInvesting is headquartered in Madison Heights, MI, a Detroit suburb. The organization was founded in 1951 when five investment clubs formed the national association. Its mission is to educate individuals on the benefits of long-term investing in common stocks. With the popularity of 401(k)'s and other defined contribution retirement plans, programs on investing in both stock and bond mutual funds were added.

There are four principles to long-term investing, according to BetterInvesting. The last principle was added and emphasize in the 1980s and 90s. These principles are: 1) invest regularly, regardless of market conditions; 2) re-invest all earnings; 3) invest in growth companies (and growth mutual funds); and 4) diversify to reduce risk. The heart of the NAIC approach to investing is the third principle -- investing in growth companies. The primary form to evaluate common stocks is a two page form with a semi-log graph on the front called the Stock Selection Guide (SSG). The SSG dates to its founding and was created by George A. Nicholson though some members have advocated an updated form to reflect the speed of computers and data.

In the 1990's, NAIC started analyzing mutual funds when more of its members requested information on how to select the best mutual funds for their self-directed retirement accounts. The form to analyze mutual funds uses the same concepts as the SSG but without the semi-log graph.

Many members join because they were exposed to NAIC though their investment club. In fact, the original name of NAIC meant National Association of Investment Clubs. Currently one can join NAIC either through one's investment club or individually. Most people who join do not seem to find the organization useful to their investment education, as evidenced by the heavy turnover in membership.

NAIC is run by a trust that is governed by an eleven person Board of Trustees. This trust appoints a board of directors for the organization. The membership of the Board of Trustees and the Board of Directors is identical which can lead to confusion. The Board of Directors hires the CEO and approves all management promotions. NAIC/BetterInvesting is served by a dedicated group of 1,200 volunteers in approximately 90 chapters across the US. The volunteers in the chapters are the principal instructors of the NAIC/BetterInvesting philosophy. The volunteers are represented by another board, the National Investors Association Advisory Board. This board reports to the Board of Trustees of the organization. The NIA Board is currently chaired by Larry Reno.^[1]

The organization was the subject of an investigation by the Senate Committee on Finance on not-for-profit organizations. NAIC was one of a half a dozen not-for-profits investigated by the Senate Finance Committee. The Committee wrapped up this investigation in the summer of 2006, referring the organization to both the Internal Revenue Service (IRS) and the Securities and Exchange Commission (SEC). The Senate Finance Committee implied that the organization may have violated its tax-exempt status. CNBC also launched an investigation into NAIC/BetterInvesting based on excessive executive compensation. The organization was involved in a lawsuit with one former and a current member of its board of Trustees (also members of the Board of Directors] who claimed the Trustees failed in their fiduciary responsibility. The Michigan courts ruled against the former member but claimed the current member had standing and referred the matter to Michigan Attorney General, which governs not-for-profit organizations in Michigan. The Michigan Attorney General, as of December 2006, has not ruled on this matter. The Internal Revenue Service and Securities and Exchange Commission investigation is ongoing. As of December 2006, no criminal charges have yet been filed against members of the Board of Trustees, Board of Directors or Management of the organization.

Many local volunteers have resigned in protest from the organization generally centered on the lack of confidence in CEO Holthaus and/or the Board of Trustees; others have implied that there are corrupt practices among the upper management of the organization and the Board of Trustees has not acted in the best interest of its members. Hugh McManus, who chaired the National Investors Organization, resigned in protest in July 2005. A second national volunteer board called the Computer Group Advisory Board, with responsibility for integrating computers and the NAIC philosophy, resigned en masse in September 2006 when CEO Holthaus was given an additional year on his $400,000 yearly contract without consultation. This board was dissolved and its popular national education program, Compufest, suspended.

On January 31, 2007, the Wall Street Journal printed, and many regional papers reprinted^[3] a lead article on the problems facing the organization. Kenneth R. Lightcap, the lead outside Trustee of the organization, was quoted critizing those volunteers that did were disatisfied with the management. He claimed that the "inmates cannot run the asylum"; he also suggested that those volunteers who are unhappy should find another organization. Three days later, Mr. Lightcap unexpectedly resigned from the organization.

Membership in the organization has fallen from a high of over 400,000 in 1999 to current official estimates of 140,000 in November 2006. Some volunteers claim membership may be as low as 110,000.

CEO Holthaus has been the CEO of NAIC/BetterInvesting since the spring of 2002. He previously served on the Board of Trustees of the organization and was chosen after a national search. Many members now openly question his competence and management ability. Membership is in freefall and he has not initiated a single successful program since assuming the helm of the organization. Many volunteers are openly scornful of this often repeated claim of 1,000,000 members by the end of 2007.