Spitzer, where is the happy median?

Got Link?

Mr. A

Spitzer going out with a bang....UBS is "puzzled"....

http://biz.yahoo.com/ap/061212/investment_fraud.html?.v=4

This site says 1,000s "raped by wraps"....

http://registeredrep.com/news/NYAG-sues-UBS/

You might be surprised how well Spitzer does on this.  Don’t forget that the Insight One accounts are “fee in lieu of commsissions”.  Clients weren’t paying for ADVICE they were paying for EXECUTION OF TRADES.  And there were plenty of advisors who buried their clients in I-One and didn’t do a darn thing for 'em after that.

I did the fee based idea at SB (Asset One) for active traders and guess what? They became much less active traders! And guess what else? Their acounts underperformed actively traded accounts, by a lot!

That's why I decided to eliminate all of those accounts soon thereafter. Even though for the vast majority, they were still saving money versus commissions.

He may win. But what I would like for people to see is that the wirehouse is a car factory the wirehorse is a car salesman. If it weren't for the fact that the car companies keep coming out with new cars, and salesmen weren't servicing the desires of their customers, nobody would buy a new car until the old one died. Wirehouses reinvent the ways for you (clients) to be parted with your money. Fee based accounts, Asset Backed Securities, Scores and Primes, Managed Futures, Limited Partnerships, Closed End Funds, UITs, Rolling UITs... the list is endless, current favs include Managed Money and its unsavory cousin Hedge Fund. (Be sure that the fees will be cut on Managed Money by the end of next year! The max you'll be allowed to charge will be 1% for Equity and .75% for FI.) The factory puts out the product. The car company puts out the new model. The consumer ought to know by now not to by the first few model years of a car (except if you are a collector) it'll take a few years to work out the bugs. Same with Wirestreet, but by the time they work out the fleas, it may turn out there is no dog left!

Brokers are supposed to know this too, and no matter how many times the branch manager gets up in the meeting and says "FMA's Asset One and Online Access!" you are supposed to know what is worst for your clients, and not do it! (you cannot know what is best)

Mr. A 

http://www.nypost.com (business)---more on the Spitzer suit to include rumors of new probes at other wirehouses.

Also, see John Churchill's piece posted after the close:

http://www.registeredrep.com

[quote=mranonymous2u]

I did the fee based idea at SB (Asset One) for active traders and guess what? They became much less active traders! And guess what else? Their acounts underperformed actively traded accounts, by a lot! [/quote]

Why/how would trading acounts become less active once the commissions were gone? Was it because, since there were no commissions to be had, you stopped calling?

Dont you realize that you are supposed to tell your clients they can get it cheaper trades  at ameritrade or if you recommend a fund you must first tell them that the vangaurd  fund are a cheaper alternative or maybe an ETF at ameritrade. I have an account here that has been in a fee based account  for years that is now a discretionary account and they are telling me i did not trade enough. the performace report shows I was equal with the market and much more tax efficient than a fund would gave been. This world is crazy

Why doesnt spitzer go after life insurance or the mortage business. Or better yet...the lawyers.

Or better yet (dare I say it?) politicians!



The root problem, as I see it, is that leeches like Spitzer wanted to make

political hay out of something for their own aggrandizement, so they made

fees and costs more important than profit, at least in the mind of the public.

The result? A trade is a bad idea if there’s a commission involved. Paying a

fee is a bad idea if there’s no trading going on, even if the prudent course at

the moment is accumulating cash for a correction. Clients are not

responsible for their own follies.



Imagine how much fun Spitzer will be when he starts his run for the White

House.

[quote=aldo63]

Dont you realize that you are supposed to tell your clients they can get it cheaper trades  at ameritrade or if you recommend a fund you must first tell them that the vangaurd  fund are a cheaper alternative or maybe an ETF at ameritrade. I have an account here that has been in a fee based account  for years that is now a discretionary account and they are telling me i did not trade enough. the performace report shows I was equal with the market and much more tax efficient than a fund would gave been. This world is crazy

Why doesnt spitzer go after life insurance or the mortage business. Or better yet...the lawyers.

Politicians are like some of our cilents, they ask about the fees because that is all they know to ask about.  They think (like some compliance departments) that cheaper fees MUST mean a better investment. 

I have a client who lives in Arkansas who wanted me to open a 529 for their new child.  After looking into it, I found Arkansas has NO advisor-sold 529! (Please correct me if I'm wrong)  So, I told her that she could open another state's 529, but would miss out on the tax deduction. So, I showed her the website to open it herself.  I haven't talked with her since then, but I would bet $10 she has not opened it yet.

That begs the question, did the Arkansas government save her an upfront load, or cost her kid money for college?  I believe it's the latter.

Mike,

Interestingly enough, in most cases I spoke with the clients just as often as before (keep in mind that these were my favored clients that I had put into these accounts, I remember one client asking me "What? Are you crazy? Why would you opt to charge me less for the work that you do?"), but I opted to hold positions longer (which turned out to be a bad idea in that the market was swooning). When I discovered this flaw in the system I closed out the fee based accounts.

We all make mistakes, it's what we do when the mistake is made that makes a difference. I saw the problem and I didn't "Stay the course."

From this point on I invoke my 5th amendment right not to incriminate myself.

Mr. A

[quote=mranonymous2u]

.....but I opted to hold positions longer (which turned out to be a bad idea in that the market was swooning). When I discovered this flaw in the system I closed out the fee based accounts.[/quote]

I'm still trying to understand how how you're paid (commissions or a flat fee) changed what you were doing in the accounts and how they could have possibly underperformed commission accounts if you were doing the same things in all of them.

Where did I say that I was doing the same thing in both accounts? Indeed, you cited the very passage that states that I opted to hold positions.

Further, I could make more money on a position by holding it and getting some percentage (I forget how much I was charging) than I could have if I had sold it in a non fee account (say the position was worth $25,000 and I was charging 2% management fee = $500/year to hold, vs. a $400 commission if I sold it in a regular account). As such I had a vested interest in holding the position, just as I had a vested interest in selling the security outside the fee based account.

One must do what one thinks is best for the client, but one must always be suspicious of one's own motives too. I was suspicious of my motivations as a commissioned salesperson. What I found through this experience was that, even given my motivation to buy and sell with an eye towards the income such activity generated, my clients were net net better off as compared to when I operated inside the fee based paradigm. When this became clear, I discontinued the fee based paradigm. If I had found that the fee based paradigm had out performed the commission, I'd have moved in that direction.

It might well work for others, it didn't work for me.

Mr. A (and now you know why)

What ever happend to all that money Spitzer collected from Wall Street firms from fines?  Hmm, I didn't get anything back and I owned mutual funds including Putnam in my 401k.  Did they just forget about me?  This guy is as bad in my opinion as the crooks he is going after.  Nothing but a future political hack looking to build his credentials.  I don't think he cares a lick about mom and pop investor.   I'm sure he will be getting plenty of contributions to his future campaign from good ol' Sandy Weil.  Why didn't he go after him?   

[quote=mranonymous2u]

Where did I say that I was doing the same thing in both accounts? Indeed, you cited the very passage that states that I opted to hold positions. [/quote]

Then why were you doing different things in commission versus flat fee accounts, and then comparing performance of the two?

[quote=mranonymous2u]Further, I could make more money on a position by holding it and getting some percentage (I forget how much I was charging) than I could have if I had sold it in a non fee account (say the position was worth $25,000 and I was charging 2% management fee = $500/year to hold, vs. a $400 commission if I sold it in a regular account). As such I had a vested interest in holding the position, just as I had a vested interest in selling the security outside the fee based account.[/quote]

Perhaps it's just me, but the above doesn't make any sense. In the case of a flat-fee account you're going to make that $500 if you hold (although your compliance dept will eventually make you close a flat-fee account where there aren't any tranactions) or if you turn it over at 300%. There's no "vested interest to hold" in a flat-fee account.

It sounds like you're saying your clients did better in the commission account by accident because your trades motivated only by commission creation worked out better somehow...

[quote=mranonymous2u]One must do what one thinks is best for the client, but one must always be suspicious of one's own motives too. I was suspicious of my motivations as a commissioned salesperson. What I found through this experience was that, even given my motivation to buy and sell with an eye towards the income such activity generated, my clients were net net better off as compared to when I operated inside the fee based paradigm. When this became clear, I discontinued the fee based paradigm. If I had found that the fee based paradigm had out performed the commission, I'd have moved in that direction.[/quote]

It just seems to me you should have been making buy/sell recommendations the same whether the account is flat-fee or commission. I just can't see a reason why the performance would differ, unless you didn't conduct some tranactions you otherwise would have in a commission account because there was no possible income to be created for you, since the flat-fee account paid you the same regardles..

I thought he whacked Sandy pretty hard. Did I miss something?

Mr. A

Mike,

What's it to you?

I don't really give a flying fandango what it seems to you as. I told you how it went.

You are reading what you want it to say, I don't agree with your interpretation but I don't see any reason for me to explain myself any  better.

You assume that because I held a stock means that I did nothing in the account. You assume that because I admit that I am motivated by a desire to make money that this is my only motivation. Neither of these assumptions are valid.

You're assuming that the compliance dept was going to force me do do something... what Spitzer is saying is that compliance departments didn't do (indeed, by the time compliance was saying "boo" about these accounts, I was already on the downward slope in their regard).

"...since the flat-fee account paid you the same regardles.." Not true, it's not a flat fee, it's a percentage fee. Perhaps that's why you don't know/can't see.

Mr. A

[quote=mranonymous2u] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Mike,

What's it to you?

I don't really give a flying fandango what it seems to you as. I told you how it went. [/quote]

Just pointing out your story made little sense and asking for clarification.

 [quote=mranonymous2u]  You assume that because I held a stock means that I did nothing in the account. [/quote]

I don’t recall saying that.

[quote=mranonymous2u] You're assuming that the compliance dept was going to force me do do something...[/quote]

Good point, my mistake. I assumed your compliance department would do what mine would/does.

[quote=mranonymous2u] "...since the flat-fee account paid you the same regardles.." Not true, it's not a flat fee, it's a percentage fee. Perhaps that's why you don't know/can't see. [/quote]

That too is a good point, it’s percentage fee based on the account size.

They’re often referred to as a “flat-fee” account versus commission account. The point still stands, however, the fee account paid you the same whether you traded in it or not, thus there’s no “vested interest in holding a position” as you said there was.

[quote=Starka]The root problem, as I see it, is that leeches like Spitzer wanted to make
political hay out of something for their own aggrandizement, so they made
fees and costs more important than profit, at least in the mind of the public.

The result? A trade is a bad idea if there’s a commission involved. Paying a
fee is a bad idea if there’s no trading going on, even if the prudent course at
the moment is accumulating cash for a correction. Clients are not
responsible for their own follies.
[/quote]

My sentiments exactly. Spitzer’s only motivation is self-promotion. In January he’ll be sworn in as NY’s Governor and won’t see this lawsuit through. Frankly, I don’t see a strong case. Here’s why:

UBS has a strong internal review process in place to flag inactivity, high cash positions, big losses or excessive day trading. In my experience noted earlier, a letter was automatically mailed to clients of flagged accounts from HQ with copies to me and my BOM.

In my opinion, I should have been able to address the issue with management as to client suitability, preference or supporting  documentation.  I felt it was wrong to send a mixed message to clients: one day we recommend a fee-based account and the next day its not the best program we offer.

Like someone else said, Spitzer has never put any money into my pocket or my clients after all the multi-million suits and settlements, on the contrary.

I said "say the position was worth $25,000 and I was charging 2% management fee = $500/year to hold, vs. a $400 commission if I sold it in a regular account. "

You said, " In the case of a flat-fee account you're going to make that $500 if you hold (although your compliance dept will eventually make you close a flat-fee account where there aren't any tranactions)"

Which, presumes that this transaction is the sum total of the account, it was only a position, of many. I could hold the position and trade around it (just like I could have in the commission account) My vested interest in holding it was that it was moving higher (at the moment) and that upward motion meant that I was going to get paid more for the asset in the future.

In one scenario, I have a vested interest in thinking that the growth had slowed to a point where I thought that I could do better elsewhere (or in cash) and in the other I had a vested interest in thinking that the stock price was going to continue higher. It so happened that the former turned out to be right and the latter was not.

"I assumed your compliance department would do what mine would/does." NOW! They didn't do it then. Keep in mind, we're talking 1998, 99 somewhere in there, prebear market. They had verbiage about making sure the account was suitable for the client (and in my cases it was, it was for traders) but the BOM would surely give someone an attaboy for every one of these that got signed up because NY was all over him trying to make this product work, which meant getting it funded up to critical mass such that it supported the salaries of the buerecrats/clerks assigned to it. 

The business prevention units were told to stand down on this product. Or so it would seem.

Mr. A

 "say the position was worth $25,000 and I was charging 2% management fee = $500/year to hold, vs. a $400 commission if I sold it in a regular account.

" In the case of a flat-fee account you're going to make that $500 if you hold (although your compliance dept will eventually make you close a flat-fee account where there aren't any tranactions)"

Which, presumes that this transaction is the sum total of the account, it was only a position, of many.

It presumes nothing. I simply used your example.

 My vested interest in holding it was that it was moving higher (at the moment) and that upward motion meant that I was going to get paid more for the asset in the future.

That's the first time I've ever heard of a holding something because it's going up (something the client wants) a "vested interest" as if it's a bad thing and a slight against fee based accounts. Hopefully everything you're doing in a client's account is because you want it to increase in value, fee or commission account.

In one scenario, I have a vested interest in thinking that the growth had slowed to a point where I thought that I could do better elsewhere (or in cash) and in the other I had a vested interest in thinking that the stock price was going to continue higher.

You realize that makes zero sense, right? Even in a fee account it's in your interest to trade if you think you could "do better" elsewhere, and it's in the client's interest as well.

Do you think you're telling me something I don't know? You have another think coming.

And if you don't think that every person acts in their own self interest, you're a fool!

What is in my self interest is often aligned with the self interest of my clients. What is in my self interest is keeping my clients as clients for as long as possible and to do that I have a self interest of "alturism."

This all may be new to you and your first reaction is to parrot what you have heard so many times before, but that's ok, you're not the first person not to have thought things through for yourself.

It's obvious that you have never considered your own motives in brokerage transactions, I don't know if this is because you are amoral or unconscious of the fact that you have motives.

Every professional salesman knows that before you can sell anything to anybody, you must first sell it to yourself. That goes for buying and selling in our business. When you call a client with the intention of taking a profit in a position (or a loss, or a rebalance or which ever of the millions of reasons there are to sell out a position) you must first convince yourself that this is the proper course.  It is also true when you are deciding NOT to sell. You must convince yourself that it is wiser to let your profits run (in which case you have convinced yourself that this will happen), or to wait for the stock to "come back" in the case of a loss (we all know how often this is a bad idea, but we still do it because of those times when we didn't and the next day there was a takeover offer). In making this determination it is important for every salesman to know what his vested interests are such that he keeps them in proper perspective vis a vis the other factors around the decision.

The idea that a fee based paradigm takes this conflict of interests away is false. It only replaces one conflict with another. This is what I learned by having used the product in the real world. This is why I don't use these products anymore.

Is that clear enough?

Mr. A

And if you don't think that every person acts in their own self interest, you're a fool!

Oh, my mistake. I thought I was talking with a professional. Sorry..

This all may be new to you and your first reaction is to parrot what you have heard so many times before, but that's ok, you're not the first person not to have thought things through for yourself.

It's not uncommon to come across someone here who has a slight difficulty expressing themselves in a logical manner. OTOH, you're exceptional in just how difficult it is to follow you…

It's obvious that you have never considered your own motives in brokerage transactions, I don't know if this is because you are amoral or unconscious of the fact that you have motives.

Ever consider that my motive are to make my client money? That keeps them with me and far more likely that they'll refer others to me.

Every professional salesman knows that before you can sell anything to anybody,…

The idea that a fee based paradigm takes this conflict of interests away is false. It only replaces one conflict with another. This is what I learned by having used the product in the real world. This is why I don't use these products anymore.

Sorry, but there’s just no logic to what you’re saying. Even if you’re lowlife enough to be driven solely by self-interest and have no concern about the client’s results, your interest and theirs is served simultaneously when you act to make the account larger via solid performance.

The only exception is something we haven’t touched on, and that’s when an advisor takes on far more risk (undisclosed to the client) than is appropriate in an account in order to juice up the returns, to make the account and thus the fee, larger.

You see, that's what your problem is, Mike.

No matter how often it is repeated that self interest is a PART of the decision making process, you still say "driven soley by self interest". Forget that you are repeating what I had said " What is in my self interest is often aligned with the self interest of my clients. What is in my self interest is keeping my clients as clients for as long as possible and to do that I have a self interest of "alturism." and claiming that it is the opposite of what was said "Sorry, but there’s just no logic to what you’re saying. Even if you’re lowlife enough to be driven solely by self-interest and have no concern about the client’s results, your interest and theirs is served simultaneously when you act to make the account larger via solid performance."

You are too busy claiming the moral highground to bother understanding what has been said to you.

Self preservation is hardwired into the human being, pretending that you don't, or not understanding that you do act in your own self interest is infantile. If you really know this little about human psychology, you really are a danger to your clients and should remove yourself from the business.

""

No, Mike, it's not about acting against the clients best interest. The fact is, you don't KNOW whether you are acting in the client's best interest or not. Because you do not KNOW what tomorrow will bring. If you think you do, then you are delusional and your clients would be best served if you were hauled off to the looney bin!

Did you know that someone was going to fly two planes into the twin towers? Do you know when the next big earthquake is going to hit California?

So holding a stock because you have convinced yourself that it going to go higher is not always in the client's best interests. You must convince yourself, and you must know that your own self interests weigh on your decisions.

Just like you must know if you are by nature a Bull or a Bear. Bulls always think things are going up and bears always expect the worst to happen. It is important to temper this enthusiasm/pessimism when making investment decisions.

You can't and you don't stop being a human being when you take this job. Humans are complex critters. None of them are perfect.

Mr. A

[quote=skeedaddy2]

[quote=Starka]The root problem, as I see it, is that leeches like Spitzer wanted to make
political hay out of something for their own aggrandizement, so they made
fees and costs more important than profit, at least in the mind of the public.

The result? A trade is a bad idea if there’s a commission involved. Paying a
fee is a bad idea if there’s no trading going on, even if the prudent course at
the moment is accumulating cash for a correction. Clients are not
responsible for their own follies.
[/quote]

My sentiments exactly. Spitzer’s only motivation is self-promotion. In January he’ll be sworn in as NY’s Governor and won’t see this lawsuit through. Frankly, I don’t see a strong case. Here’s why:

UBS has a strong internal review process in place to flag inactivity, high cash positions, big losses or excessive day trading. In my experience noted earlier, a letter was automatically mailed to clients of flagged accounts from HQ with copies to me and my BOM.

In my opinion, I should have been able to address the issue with management as to client suitability, preference or supporting  documentation.  I felt it was wrong to send a mixed message to clients: one day we recommend a fee-based account and the next day its not the best program we offer.

Like someone else said, Spitzer has never put any money into my pocket or my clients after all the multi-million suits and settlements, on the contrary.

[/quote]

Skee you better believe that UBS initiated that stringent review process after they realized that they were in deep doo-doo with some of the accounts for inactivity…

[quote=mranonymous2u]

So holding a stock because you have convinced yourself that it going to go higher is not always in the client's best interests. You must convince yourself, and you must know that your own self interests weigh on your decisions.  [/quote]

Anyone else want to take a crack at this?

[quote=mikebutler222][quote=mranonymous2u]

So holding a stock because you have convinced yourself that it going to go higher is not always in the client's best interests. You must convince yourself, and you must know that your own self interests weigh on your decisions.  [/quote]

Anyone else want to take a crack at this?

[quote=joedabrkr] [quote=mikebutler222][quote=mranonymous2u]

So holding a stock because you have convinced yourself that it going to go higher is not always in the client's best interests. You must convince yourself, and you must know that your own self interests weigh on your decisions.  [/quote]

Anyone else want to take a crack at this?

[/quote]

No thanks Mike...that's like drunk logic.....
[/quote]

It's nice to know it's not just me thinking that....

You guys never bought and sold stocks did you?

You guys are "asset gathering, buy and holders" geeks aren't you? You sell mutual funds and "managed money" and Annuities and whole life policies, right?

I had a client the other day and his position in this stock was up 20%, which is my target return (I get 20% and I get out)... But in this particular case I was about to start buying this position for other clients, so I din't sell it for him. I convinced myself to go against my rule and hold for this client, this position. In fact, if I think it has 20% upside from here for my other clients, why don't we add to your position mr. Jones?

Did I do what was in the client's best interest?

Straight yes or no is all you get.

Mr. A

[quote=mranonymous2u]

You guys never bought and sold stocks did you?

You guys are "asset gathering, buy and holders" geeks aren't you? You sell mutual funds and "managed money" and Annuities and whole life policies, right?

I had a client the other day and his position in this stock was up 20%, which is my target return (I get 20% and I get out)... But in this particular case I was about to start buying this position for other clients, so I din't sell it for him. I convinced myself to go against my rule and hold for this client, this position. In fact, if I think it has 20% upside from here for my other clients, why don't we add to your position mr. Jones?

Did I do what was in the client's best interest?

Straight yes or no is all you get.

Mr. A

Yes or No?

Mr. A

"in your estimation, the stock is NOW likely to do going forward compared to other viable alternatives-including cash."

Thank YOU!

So what you are doing is convincing yourself that the stock is going to go higher, and in making that decision you must understand that your self interests are a part of the the mix! Are you making a dispassionate assessment or are you falling prey to your own greed?

You've heard of fear and greed, right?

Mr. A

Sorry Mr A, I have to agree with Mike that what you've written is not very clear.

I agree that broker payout, no matter how it is structured, will shape our advice at some level.  However, my interpretation is that your actively traded accounts outperformed your "buy and hold" accounts.  But this is strategy, and you don't clearly explain why you couldn't use this strategy in a fee based account.  If fee based accounts promote growing assets, aren't you motivated to use whatever strategy you believe to work the best?  This would then be in both your best interest and the clients.   

[quote=mranonymous2u] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

You guys never bought and sold stocks did you? [/quote]

Wrong. BTW, ever heard the term "non sequitar"?

[quote=mranonymous2u]

You guys are "asset gathering, buy and holders" geeks aren't you? [/quote]

I gather assets, I don’t “buy and hold” and “geek”? Well, I donno about that one…

[quote=mranonymous2u]

 You sell mutual funds and "managed money" and Annuities and whole life policies, right? [/quote]

1. No

2. Yes

3. Yes

4. No, not that I’m opposed

Sorry, but none of the above seems to have anything to do with why you wouldn’t, as a matter of basic business practice, regardless of account type, act in the client’s best interest.

[quote=mranonymous2u]

I had a client the other day and his position in this stock was up 20%, which is my target return (I get 20% and I get out)... But in this particular case I was about to start buying this position for other clients, so I din't sell it for him. I convinced myself to go against my rule and hold for this client, this position. In fact, if I think it has 20% upside from here for my other clients, why don't we add to your position mr. Jones?

Did I do what was in the client's best interest?

Straight yes or no is all you get.

Mr. A

[/quote]

If you held because you thought it would go up, you acted in his best interest.

I’m not trying to give you grief here, Mr. A, but your posts seem to be written by someone struggling with a second language. Is that the case?

[quote=mranonymous2u]

So what you are doing is convincing yourself that the stock is going to go higher, and in making that decision you must understand that your self interests are a part of the the mix! [/quote]

Again, this makes zero sense. There's no need for your "self interests" to be part of an estimate on where the stock price will go next.

Make a decision based on the best info you have, your methodology and make whatever's required happen in the appropriate accounts, whether they're commission or fee based. It isn't really very complicated.

[quote=mranonymous2u]

“in your estimation, the stock is NOW likely to do going forward compared to other viable alternatives-including cash.”

Thank YOU!

So what you are doing is convincing yourself that the stock is going to go higher, and in making that decision you must understand that your self interests are a part of the the mix! Are you making a dispassionate assessment or are you falling prey to your own greed?

You've heard of fear and greed, right?

Mr. A

With all this “self interests” talk….<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

[quote=joedabrkr] In the end it all boils down to fear and greed.  If you are running a fee-based account, the decision to hold involves potentially earning a higher fee.[/quote]

Again, even in the seamy world of broker self interest, higher account value = higher fee, and since the client's aim is also a higher account value (unless, as I mentioned before, the FA takes more risk to get that higher account value than the client would knowingly accept or more than  is appropriate) both aims are aligned.

 [quote=joedabrkr]  In a commission based environment, one is deciding to delay gratification(realizing gain and getting paid) in hopes of a potentially larger payday down the road.
[/quote]

Here’s where, imho, things can get dicey. The FA thinking “broker self interests” has an incentive to trade often, regardless of the effects on account growth, since that’s the only source of his income. There’s no natural or default alignment of interests there. An unscrupulous FA can find a way to make more by way of trading even if the end effect is that account size declines and he therefore as less to trade with.

BTW, I'm not assuming we disagree here, joe. Just trying to make my position clearer.

And yet the stock went down 20+ percent the next day. Sandisk.

Why do you asset gather for money managers?

Why do you buy money managers and not mutual funds?

Have you ever called a client and said "I think we ought to take some profits off the table, let's sell 15% of this money manager's position!" ?

Why are your clients paying YOU for work that the money manager is doing?

No! I've never heard of a non sequitar. I've heard of non sequitors and the statement that I can only assume you are referring to is far from the definition of non sequitor. Since you have no idea of the process that goes into trading stocks, it is a reasonable sequence of thought to say that you have little to no experience in doing it (trading stocks). Further, since you are blathering in a forum ostensibly made up of people in the financial services industry, I give you the benefit of the doubt that you are in the industry, and since you obviously don't know anything about the process of trading stocks, you must be a hawker of product. You see, it does follow.

"your posts seem to be written by someone struggling with a second language. Is that the case?"

I'll let this pass, but just know that you've left yourself wide open.

"

Sorry, but none of the above seems to have anything to do with why you wouldn’t, as a matter of basic business practice, regardless of account type, act in the client’s best interest."

Mike, I can not make this any clearer. We ALL, ALWAYS, THINK that we are acting in the client's best interests. Even the guy who loads up the old lady in tech stocks THINKS that he is acting in her best interests. And if she profits from it then he did act in her best interests. When Tyler whathisname for the Alliance Growth fund bought all that Enron, he thought he was acting in his investor's best interests. The clients best interests are a given. What you need to know is what ALL of your motivations are before you can KNOW that you have weighed them against each other and come to an unbiased conclusion.

What I found with the fee based trading account was that I traded one conflict of interest for a different one. Given that, I decided, that, FOR MYSELF, I was more comfortable with the commission based self interest.

That's as clear as I can be and it ONLY pertains to ME.

Mr. A

[quote=mranonymous2u]

And yet the stock went down 20+ percent the next day. Sandisk.

Why do you asset gather for money managers?

Why do you buy money managers and not mutual funds?

Have you ever called a client and said "I think we ought to take some profits off the table, let's sell 15% of this money manager's position!" ?

Why are your clients paying YOU for work that the money manager is doing?

No! I've never heard of a non sequitar. I've heard of non sequitors and the statement that I can only assume you are referring to is far from the definition of non sequitor. Since you have no idea of the process that goes into trading stocks, it is a reasonable sequence of thought to say that you have little to no experience in doing it (trading stocks). Further, since you are blathering in a forum ostensibly made up of people in the financial services industry, I give you the benefit of the doubt that you are in the industry, and since you obviously don't know anything about the process of trading stocks, you must be a hawker of product. You see, it does follow.

"your posts seem to be written by someone struggling with a second language. Is that the case?"

I'll let this pass, but just know that you've left yourself wide open.

"

Sorry, but none of the above seems to have anything to do with why you wouldn’t, as a matter of basic business practice, regardless of account type, act in the client’s best interest."

Mike, I can not make this any clearer. We ALL, ALWAYS, THINK that we are acting in the client's best interests. Even the guy who loads up the old lady in tech stocks THINKS that he is acting in her best interests. And if she profits from it then he did act in her best interests. When Tyler whathisname for the Alliance Growth fund bought all that Enron, he thought he was acting in his investor's best interests. The clients best interests are a given. What you need to know is what ALL of your motivations are before you can KNOW that you have weighed them against each other and come to an unbiased conclusion.

What I found with the fee based trading account was that I traded one conflict of interest for a different one. Given that, I decided, that, FOR MYSELF, I was more comfortable with the commission based self interest.

That's as clear as I can be and it ONLY pertains to ME.

Mr. A

"How exactly has he left himself wide open? " Joe

"your posts seem to be written by someone struggling with a second language. Is that the case?" Mike

"I'll let this pass, but just know that you've left yourself wide open." Mr. A

I could have said something like, "Yes, I'm writing in dumbese, which seems to be your native tongue." or something else as snarky. But I decided against.

Did you really need to cut and paste that whole thing to ask me that?

Mr. A

[quote=mranonymous2u]"How exactly has he left himself wide open? " Joe

"your posts seem to be written by someone struggling with a second language. Is that the case?" Mike

"I'll let this pass, but just know that you've left yourself wide open." Mr. A

I could have said something like, "Yes, I'm writing in dumbese, which seems to be your native tongue." or something else as snarky. But I decided against.

Did you really need to cut and paste that whole thing to ask me that?

Mr. A

[quote=mranonymous2u]“your posts seem to be written by someone struggling with a second language. Is that the case?” Mike

I'll let this pass, but just know that you've left yourself wide open.

Mr. A

[/quote]

The question wasn't intended to be insulting. I'm sorry if it sounded that way.

[quote=mranonymous2u] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

And yet the stock went down 20+ percent the next day. Sandisk. [/quote]

Being wrong doesn’t mean you weren’t acting in the client’s best interests. It simply means you were wrong.

[quote=mranonymous2u]

Why do you asset gather for money managers?

Why do you buy money managers and not mutual funds? [/quote]

I find I have more control on a number of fronts using money managers over mutual funds. We can discuss this on another thread, if you like.

[quote=mranonymous2u] Have you ever called a client and said "I think we ought to take some profits off the table, let's sell 15% of this money manager's position!" ? [/quote]

I weight money mangers by asset class. If an asset class has grown outside of the percentage of the portfolio we’ve set for that asset class, we will take profits and move that money to an undersized manager.

[quote=mranonymous2u] Why are your clients paying YOU for work that the money manager is doing? [/quote]

We don’t do the same work, but we can save that discussion for another thread.

[quote=mranonymous2u] No! I've never heard of a non sequitar. I've heard of non sequitors and the statement that I can only assume you are referring to is far from the definition of non sequitor.  ….[/quote]

Actually the word is non sequitur….

[quote=mranonymous2u]Since you have no idea of the process that goes into trading stocks…. [/quote]

Uh, wrong, again. But please do continue….

 "Sorry, but none of the above seems to have anything to do with why you wouldn’t, as a matter of basic business practice, regardless of account type, act in the client’s best interest."

That's a statement I made, which I stand by. IMHO you haven't explained what's incorrect about it.

[quote=mranonymous2u] What I found with the fee based trading account was that I traded one conflict of interest for a different one.[/quote]

You keep saying that, yet you haven’t seemed to have defined this new “conflict of interest” to the satisfaction of anyone responding to you about it.

"I find I have more control on a number of fronts using money managers over mutual funds."

Such as? And do these additional fronts justify the increased fees? I'm sure you think that they do. I'm equally sure that people in the NYS AG's office will eventually beg to differ.

"... we will take profits and move that money to an undersized manager."

You sell your winners to buy more of your losers.

Why? Because you have convinced yourself that this is the proper blah blah blah... The point is that you have convinced yourself. You may think that it is purely a mathematical construct, but you have to have convinced yourself that this construct has validity, and that you, as a portfilio manager/market timer (which is what you are) are going to outperform the s&p 500, even though the vast majority of you guys do NOT. And that's not including the massive fees you charge your clients for this underperformance ("That's not true I outperformed blah blah blah...") And why did you convince youself of this? Because you will be able to make money if you can convince others of it's efficacy. You have a vested interest in convincing yourself. Deny it! I dare you.

Mike, Going over the process of deciding with someone who obviously doesn't have the vocabulary of motivations is showing itself to be pointless. You have a preconcieved (and immature) notion of what "self interest" and "vested interests" mean. You have a non existent understanding of individual perspective(whether one is bullish or bearish by nature). You have a simplistic view of complex problem solving in that you talk in absolutes, things are either 100% this way or 100% that way. You seem to think that the market will always go up and that there is only need for rebalancing of portfolios. You seem to have a self righteousness that is, to me, proof positive of all the above charges. You are internally consistant, I'll give you that.

Will Rogers (among others) is credited with having said, "It's not what he don't know that scares me. It's what he's dead certain of that's just plain wrong!" Unfortunately, in your case, it's both.  

That would be an ad hominem attack, except that I backed the assertion up with evidence and it is a conclusion, not a personal dismissal in lieu of rebuttal.

Mr. A

I find I have more control on a number of fronts using money managers over mutual funds.

[quote=mranonymous2u]Such as? [/quote]<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Management costs, gain/loss realization, investment style purity (which leads to better overall portfolio performance), detailed info on holdings, etc..

[quote=mranonymous2u]And do these additional fronts justify the increased fees? I'm sure you think that they do. I'm equally sure that people in the NYS AG's office will eventually beg to differ. [/quote]

I won't argue with your Ms. Cleo-type efforts about what the NY Ag's office may someday do on the subject of SMA costs. You seem to be confusing that issue with the fee-in-lieu of commission accounts they went after UBS on. Often SMAs are cheaper than most mutual funds…

"... we will take profits and move that money to an undersized manager."

[quote=mranonymous2u]You sell your winners to buy more of your losers.

Why? Because you have convinced yourself that this is the proper blah blah blah... [/quote]

Actually it’s because I relied on Nobel Prize winning studies….

[quote=mranonymous2u]And why did you convince youself of this? Because you will be able to make money if you can convince others of it's efficacy. You have a vested interest in convincing yourself. Deny it! I dare you.[/quote]

If my “vested interest” drove the train I could make more using other approaches.

[quote=mranonymous2u]Mike, Going over the process of deciding with someone who obviously doesn't have the vocabulary of motivations is showing itself to be pointless. [/quote]

IOW, you still haven’t figured out how to explain away (READ: remove your foot from your mouth) about this “conflict of interest” you’ve repeatedly alluded to, but haven’t been able to define.

[quote=mranonymous2u]That would be an ad hominem attack, except that I backed the assertion up with evidence and it is a conclusion, not a personal dismissal in lieu of rebuttal.[/quote]

No, actually what you did is make a statement (flat fee accounts have their own conflict of interest) that you were called on to detail and you've have spent the last ton of bandwidth trying to edge away from.

 As you squirmed, you attempted to deflect attention by claiming I wasn’t familiar with stock trading (which is how I built my business) and from there your inability to express yourself clearly has simply made it obvious that continuing this thread is a waste of time.

Mike,

mike mike mike mike. (You) no I have a conflict of interest with a fee based trading account in that MY "greed" side is given more credence than MYfear side when I'm trading stock.  That's what I found when I used the product.

I allowed MYSELF to believe that stocks were going to continue going up. Whereas, with the commission based accounts I was not as willing to let MYSELF be so optimistic.

I had a conflict of interests. I wanted to let the stock go, go, go because I eventually got paid more "when" (as opposed to "if") it did. I wanted to be paid more.

That is a conflict of interests you MORON!

You don't think for yourself, you let others do it for you, and you pick and choose which studies you want to use because of YOUR VESTED INTERESTS I notice you aren't crowing about the myriad studies that say "Put your money in an S&P 500 fund and leave it, you'll outperform almost all investment managers!" I notice you aren't just telling clients to "put your money in Warren Buffet's company and forget about it!" I notice you are not saying that you are using low cost ETF's and CEF's.  I notice you don't espouse the Random Walk Theory! Why not? Because those ideas won't make YOU as much money!

The conflict exists. You obviously can't even admit that it is there so there is no possible way that you can inveigh against it.   Who's worse?

YOU!

I'll be more than happy to let you have the last word on this thread.

Mr. A

Mike, thanks for not leaving Ms. Cleo out of the discussion. 

[quote=mranonymous2u]

I allowed MYSELF to believe that stocks were going to continue going up. Whereas, with the commission based accounts I was not as willing to let MYSELF be so optimistic. [/quote]

Last chance for anyone to find some logic in this. Otherwise I'll let it die. It really makes zero sense to me. If someone else can explain it, I'd be interested in just how. I think Joe’s right on this one being “drunk logic”.

[quote=mranonymous2u]I had a conflict of interests. I wanted to let the stock go, go, go because I eventually got paid more "when" (as opposed to "if") it did. I wanted to be paid more. [/quote]

How fortunate that your "conflict of interest" managed to put you on the very same side of the table as the client, since he TOO wanted to see the stock "go, go, go".....What you’re describing is anything but a conflict of interest.

[quote=mranonymous2u] I notice you aren't crowing about the myriad studies that say "Put your money in an S&P 500 fund and leave it, you'll outperform almost all investment managers!" [/quote]

If you think that's what the studies say you haven't read them closely enough.

[quote=mranonymous2u]I notice you aren't just telling clients to "put your money in Warren Buffet's company and forget about it!" [/quote]

See above. Buffet's company and his large cap value approach (like any other) goes through long periods of underperformance against a balanced portfolio containing differing investment styles.

[quote=mranonymous2u]I notice you are not saying that you are using low cost ETF's and CEF's. [/quote]

You didn't ask, but the fact is I use both.

[quote=mranonymous2u] Why not? Because those ideas won't make YOU as much money! [/quote]

As I will detail below, there’s no lack of conflicts of interest in this industry. OTOH, there are plenty of reasons to find one investment philosophy more persuasive (the long running argument between active and passive management, for example) besides personal financial gain

[quote=mranonymous2u] The conflict exists. You obviously can't even admit that it is there so there is no possible way that you can inveigh against it. Who's worse?

YOU![/quote]

It’s amazing how far from the original question you’ve drifted. I never, never said there weren’t various conflicts of interest in the investment business. In fact, I detailed two such conflicts.

The question is just what “conflict of interest” could there be (assuming you know what the term means, and you have a compliance department that isn‘t asleep at the switch) in a fee account since your client wants to see the account increase in size and even your most non-altruistic motivations are served by the very same thing.

I’m beginning to suspect the real conflict here is that in your current position you can’t offer clients that option.

[quote=skeedaddy2]Mike, thanks for not leaving Ms. Cleo out of the discussion.  [/quote]

When the fake accent fits...

Happy Holidays!

Where I'm heading for the holidays

I like your picture better. Thanks for sharing. I know she’s always on your mind. So, are you heading to Jamaica (fake accent) for the holidays? 

Hey Mo!,

Did you happen to notice that there was a bear market at around the time I had my experience with the fee based accounts?

Of course you didn't because all that was required was a rebalancing of your managers that were only down 35% into your managers that were down 50%!

Holding stocks and hoping that they are always going to go higher is NOT always in your clients best interests doucebag!

Mr. A

Hey Mo!,

Yes, Mr Last Word?

Did you happen to notice that there was a bear market at around the time I had my experience with the fee based accounts?

The '98, '99 time period you were talking about?

Of course you didn't because all that was required was a rebalancing of your managers that were only down 35% into your managers that were down 50%!

Actually some were up, none were down anything like 35% (I assume you're talking about 2001 to 2002 and not the up years of '98, '99)

Holding stocks and hoping that they are always going to go higher is NOT always in your clients best interests doucebag!

I guess you're tell me this because you think I said otherwise...

Oh, and the word is "douche bag"

[quote=skeedaddy2]I like your picture better. Thanks for sharing. I know she's always on your mind. So, are you heading to Jamaica (fake accent) for the holidays?  [/quote]

Nah, further south and warmer...you?

My wife is looking at NYC, she loves the city during the holidays. But nothing is set just yet.

Further south, hmmm.  Could it be Costa Rica?  That’s where one can score a 15 year old companion for next to nothing? Not that you’re into that sort of thing.  Are the sailfish biting this time of year? My neighbor hooked 17 in one day.

Posers like Mr. A don’t stand a chance against your superior rhetorical skills.

My wife is looking at NYC, she loves the city during the holidays. But nothing is set just yet.

The weather in NYC, I'm told by family currently visiting, is great.

Further south, hmmm.  Could it be Costa Rica? 

Nope..

 That's where one can score a 15 year old companion for next to nothing? Not that you're into that sort of thing. 

Yeech.....

Are the sailfish biting this time of year? My neighbor hooked 17 in one day.

I'd rather play golf, but perhaps someday...

Posers like Mr. A don't stand a chance against your superior rhetorical skills.

I honestly started that really wanting to know about this conflict of interest in fee based accounts he mentioned (there are a couple, but not that he mentioned). Then he started posting more and I came to think differently about him.... go figure.

[quote=mikebutler222]Hey Mo!,

Yes, Mr Last Word?[/quote]

...you just knew he couldn't shut up, didn't you?!!