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Why clients need us and the problem with banks

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Mar 20, 2011 12:06 am

When someone plans or invests, they either do it themselves or they hire someone to do it. If they hire someone to do it, either on an advisory basis or discretionary basis - they deserve honest advice and we deserve to be compensated in a visible, straight forward way. If they “go their own” they can go no-load or
"buy" mutual funds from us - if they buy from us they deserve our “suitability counsel” - we can tell them “this mutual fund acts like what you’re asking for”.

The growing “bank model” fits well with the “go it your own” framework but conflicts with the advice model.

loans - if I propose a mortgage re-fi, i can only offer my banks product - advice is limited to “us or no re-fi …or some version of the home team product.” If I could offer a wells, or BOA, of a JPM mortgage, then i would be adding advice similar to what I do in a fee-based wrap program - the commission thing would need to be modified to be consistent with fee-based comp, the the "home product’ mentality alone breaks the model.

lines of credit - when we wrap an investment account with a line of credit - we DRAMATICALLY up the risk. We up the risk essentially by the same amount that we LOWER risk by adding bonds. The internal systems don’t even MEASURE this change in risk, and in our annual investment reviews, compliance doesn’t check to see if we’re even explaining this. Also, signiificantly, ENVISION et al does not incorporate this risk in the plans - can you imagine if ENVISION discarded the risk reduction of alternatives and bonds? No one would use it! So here again, the bank product significantly conflicts with the advice based model.

Management incentive currently prioritize a) lending, b) fee-based, c) planning, and two other criteria I haven’t figured out. We have bank priorities, with the risks outlined above - determining who is “premiere”. Put it all together and we have bank leadership, leveraging our relationships based on trust - to distribute their products in a way that runs counter to the reason clients engage us in the first place.

I have serious concerns. Peace out.

Mar 21, 2011 11:27 pm

No comments?  You guys are rough!

Mar 23, 2011 10:27 pm

Hello?  Helloooooo?

Mar 23, 2011 10:27 pm


Mar 23, 2011 10:57 pm

I don't have any problems with not trusting "banks".

Mar 24, 2011 4:43 am

Novea, just  because you feel guilty about what you do, and where you work, doesn't mean you should take it out on everyone else for ignoring your post.

Novea, you do what you are supposed to do. If that feeling inside you says that things are wrong or unethical, then DO SOMETHING ABOUT IT. You are either part of the problem, or the solution.

You didn't need me to tell you that. Grow up.

Mar 26, 2011 1:58 am

The growing "bank model" fits well with the "go it your own" framework but conflicts with the advice model.

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