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Our Readers Write

Quick & Reilly responds; Arrogance and the "Law of Resources"; Thinking Outside the Box; Abre Los Ojos

Quick & Reilly Responds

The comments of several sources provided to your reporter didn't make it into the feature on the strategic changes at Quick & Reilly. Your story chronicled how we moved as a firm from a discount brokerage model to a multichannel advice and guidance model emphasizing client relationships (“Not Such a Quick Change Artist,” April, 2002).

Specifically, in response to the allegation of a former employee that we ask our employees to make cold calls, the manager of our Chicago investor center, Peter Lynch, told your reporter, “Quick & Reilly has never promoted that kind of a business model. We don't have to do that here because we have plenty of existing clients to speak with and we can concentrate on needs-based selling.”

In response to former employees who complained about our compensation system that now emphasizes asset gathering and client solutions over transactions, Austin-based financial consultant Kendall R. Bizzell noted the substantial increase in his compensation under our new plan and said, “I'd hate to think what I'd be making under the old compensation system with the market having gone south. I prefer working with my clients so that they achieve their goals, rather than being a phone jockey handling 150 trades a day.”

Both Lynch and Bizzell told your reporter that management at Quick & Reilly emphasizes the importance of building long-term client relationships, helping investors achieve their goal of financial security and adhering to the highest standards of integrity and suitability.

Most of Quick & Reilly's nearly 2,000 employees have embraced our change in strategy, thrive on it, and realize that for their own future as well as that of the firm, we had to change. Our clients tell us they like the services of the new Quick & Reilly. We believe it is important that the voices of these two employees, who your reporter interviewed, be heard.
Charles G. Salmans
Senior vice president, corporate communications
Quick & Reilly
New York

Arrogance and the “Law of Resources”

After reviewing your March cover story (“Betrayed?”), I couldn't help but notice the parallels of the Amy Elias' and Phil Spartis' case against Salomon Smith Barney with broker Stephen Sawtelle's case against Waddell & Reed. Yes, Sawtelle's victory helped identify the arrogance and hypocrisies of Waddell & Reed, but primarily his victory was attributable to adequate resources. Right or wrong, Elias and Spartis will need resources to fight their battle against Smith Barney.

Whether it be a military war or a litigious war, adequate resources, or lack of, will always affect the outcome. The problem with the law of resources is that it doesn't always beget justice — just results. Remember the O.J. Simpson verdict? Without the resources of fame and fortune, Simpson would most likely have been convicted of murder.

In the financial industry, broker/dealer organizations amass resources, the most important of which is capital. And such capital creation can create arrogance. Waddell & Reed displayed an attitude of arrogance when it attacked the reputation of its own broker Stephen Sawtelle. The good news is that the publicity surrounding this case brought to the forefront the blatant audacity broker/dealers may bring to bear against an individual financial professional when it wants to. Now, Amy Elias and Phil Spartis seem to be facing a similar battle with Smith Barney.

Broker/dealers sometime mask unethical actions under the façade of protecting the individual investor. The Prudential Bache debacle of the 1980s is just one of many examples. Without accountability, firms will display neither remorse nor morality when sacrificing an individual for the benefit of the organizations. Waddell & Reed was no exception to this rule with Sawtelle, and I'm sure we'll see similar tactics from Salomon in their case with Elias and Spartis. Obviously, in Waddell's conflict with Sawtelle, they did not anticipate Sawtelle's resources (money to hire good legal advice) would be the equalizer, or, better, the neutralizer.

These cases should be a wake-up call for individual financial professionals; no matter how well things are going, reps should take time out to conduct an inventory of their emergency resources. How many reps would know what to do should it become necessary to protect themselves against a scurrilous charge from their broker/dealer?
Jerry L. Reiter
CEO/Chairman, Financial Advisors Legal Association
Las Vegas, Nev.

Thinking Outside the Box

As a former consultant for Smith Barney of 19 years, I certainly have empathy for Phil Spartis and Amy Elias. It should not be a surprise to understand that one of the strategies to handcuff advisors to the wirehouses is the use of a quick settlement on customer complaints. Marking the CRDs of reps is just one of the unspoken ways the Wall Street firms keep their assets from leaving “down the career elevator.” Too bad they use negative approaches like “forcing” brokers to participate in the CAP program and other financial deferral promises, with, of course, long vesting schedules. Imagine what it would be like if they took a positive approach, and had strategies that attracted advisors to their firm. They would not need to put up bribe money to get producers to join their firm.

Outside the Wall Street Box, companies actually have this positive approach.
Steve Booren
Capital Consulting, LPL Financial
Greenwood Village, Colo.

Abre Los Ojos

Thanks for the article on Hispanics in the investing marketplace (“Teaching Hispanics to Become Investors,” February). You hit on several of the problems I have encountered in 13 years. It seems that our industry is very slow to react to a soon-to-be powerful segment. I hope that we don't stay behind the curve.

For example, Fidelity Investments has a brochure in Spanish explaining the basics of mutual funds, but it offers no other Spanish literature, such as prospectuses or applications. That seems to present not only an ethical dilemma, but a potential liability problem in selling investments to those who cannot read the required material. Putnam has no written materials but will provide a translator. Why? It's not practical to have a translator read a prospectus to a client when you are doing a simple plan enrollment for a small business.

It would have been nice to see some solutions for those planners, not with Salomon Smith Barney which was profiled in the story. While I found myself drawn in by the title, the article didn't really show me how to do a better job of teaching my Hispanic clients and prospects. It would have been great to have some resources for more help.
Darryn Pope, CFP, CFS
The Advisory Group
Arlington, Texas

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