Advisor/ Broker Reputations

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Apr 30, 2007 3:28 pm

[quote=Bobby Hull]

Actually, I really DO turn off those perpetual fees. [/quote]

No, you don't. You replace visable fees with higher, often hidden fees.

Apr 30, 2007 3:44 pm

[quote=mikebutler222][quote=Bobby Hull]

Actually, I really DO turn off those perpetual fees. [/quote]

No, you don't. You replace visable fees with higher, often hidden fees.

[/quote]

You've never seen our suitability form.

Apr 30, 2007 3:46 pm

[quote=anonymous]The good ones do get lots of respect.  The problem from a perception point of view is that any bozo can be a financial advisor.[/quote]

This is true, anyone can call themselves advisor without having the creditials and the client's interest at heart. I know a guy who works at Primerica for 2 weeks, with just a life license called himself a "PERSONAL FINANCIAL ADVISOR"

On the flip side if a doctor practices without a proper license or even called himself a doctor you will hear about it on the news the next day...

Apr 30, 2007 3:48 pm

[quote=Bobby Hull][quote=mikebutler222][quote=Bobby Hull][quote=mikebutler222][quote=Greenbacks]

I let clients know I work for them and that LPL works for me. And also if I  was at a wirehouse or Fidelity or Schwab I would work for that BD and not for them.      

[/quote]

Now there's an assertion that would interest tens of thousands of wirehouse brokers who, as a matter of ethical business practice place the client's interest first.

[/quote]

His line gets apppointments with wirehouse clients. Another one that gets them is "the first thing I'm gonna do is turn off those perpetual fees." Or "I work with people who have outgrown what they're getting at the large firms."

[/quote]

So, dishonesty sells. Congrats....

[/quote]

Actually, I really DO turn off those perpetual fees. Wirehouse clients are the easiest to steal. "I'm a little confused, Mr. MS client, most of the MS clients that I meet are doing almost as well as I'm doing with my clients. In fact, I tell a lot of them to stay where they are. Why is your case different?" Gets 'em every time.

[/quote]

Hahaha.  That's some funny stuff.

Apr 30, 2007 3:48 pm

[quote=mikebutler222][quote=Greenbacks]

I let clients know I work for them and that LPL works for me. And also if I  was at a wirehouse or Fidelity or Schwab I would work for that BD and not for them.      

[/quote]

Now there's an assertion that would interest tens of thousands of wirehouse brokers who, as a matter of ethical business practice place the client's interest first.

[/quote]


Mike I hear what you're saying, and I understand why that "line" would get under your skin.

In my experience, though, between sales pressure and poor training, I have found that folks like yourself are the exception that proves the rule.
Apr 30, 2007 3:55 pm

[quote=Bobby Hull][quote=mikebutler222][quote=Bobby Hull]

Actually, I really DO turn off those perpetual fees. [/quote]

No, you don't. You replace visable fees with higher, often hidden fees.

[/quote]

You've never seen our suitability form.

[/quote]

Sounds like you're saying it's ok if you lie to them, because afterwards you have them sign a form that tells the truth.  Goody...

Apr 30, 2007 3:59 pm

[quote=joedabrkr] [quote=mikebutler222][quote=Greenbacks]

I let clients know I work for them and that LPL works for me. And also if I  was at a wirehouse or Fidelity or Schwab I would work for that BD and not for them.      

[/quote]

Now there's an assertion that would interest tens of thousands of wirehouse brokers who, as a matter of ethical business practice place the client's interest first.

[/quote]


Mike I hear what you're saying, and I understand why that "line" would get under your skin.

In my experience, though, between sales pressure and poor training, I have found that folks like yourself are the exception that proves the rule.
[/quote]

It's a good thing, joe, that there aren't any indies feeling "pressure" to produce (no mortgage payments among them) and they're all so superbly qualified. <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Look, I don’t mind the ribbing between channels, my point was Greenbacks made distorting the facts about other channels and impugning their integrity a matter of standard business practice and prospecting.

Apr 30, 2007 4:04 pm

[quote=mikebutler222]

It's a good thing, joe, that there aren't any indies feeling "pressure" to produce (no mortgage payments among them) and they're all so superbly qualified.

[/quote]

Far be it from me to make that claim either, Mike.   I've seen some ugly stuff out there.
Apr 30, 2007 4:07 pm

[quote=mikebutler222][quote=joedabrkr] [quote=mikebutler222][quote=Greenbacks]

I let clients know I work for them and that LPL works for me. And also if I  was at a wirehouse or Fidelity or Schwab I would work for that BD and not for them.      

[/quote]

Now there's an assertion that would interest tens of thousands of wirehouse brokers who, as a matter of ethical business practice place the client's interest first.

[/quote]


Mike I hear what you're saying, and I understand why that "line" would get under your skin.

In my experience, though, between sales pressure and poor training, I have found that folks like yourself are the exception that proves the rule.
[/quote]

It's a good thing, joe, that there aren't any indies feeling "pressure" to produce (no mortgage payments among them) and they're all so superbly qualified. <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Look, I don’t mind the ribbing between channels, my point was Greenbacks made distorting the facts about other channels and impugning their integrity a matter of standard business practice and prospecting.

[/quote]

It's a tough business, Mike. You, of all people, should know that.

Apr 30, 2007 4:29 pm

[quote=Bobby Hull][quote=mikebutler222][quote=joedabrkr] [quote=mikebutler222][quote=Greenbacks]

I let clients know I work for them and that LPL works for me. And also if I  was at a wirehouse or Fidelity or Schwab I would work for that BD and not for them.      

[/quote]

Now there's an assertion that would interest tens of thousands of wirehouse brokers who, as a matter of ethical business practice place the client's interest first.

[/quote]


Mike I hear what you're saying, and I understand why that "line" would get under your skin.

In my experience, though, between sales pressure and poor training, I have found that folks like yourself are the exception that proves the rule.
[/quote]

It's a good thing, joe, that there aren't any indies feeling "pressure" to produce (no mortgage payments among them) and they're all so superbly qualified. <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Look, I don’t mind the ribbing between channels, my point was Greenbacks made distorting the facts about other channels and impugning their integrity a matter of standard business practice and prospecting.

[/quote]

It's a tough business, Mike. You, of all people, should know that.

[/quote]

I don't know what you think you're implying with the "You, of all people.." line, Bobby. The business has been very good to me, despite a move or two I wish with 20/20 hindsight I hadn’t made early on. If you think “tough business” provides some cover for dishonest business practices or impugning the integrity of others, you’re mistaken.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Apr 30, 2007 4:34 pm

I think even more so than the fact that we bad mouth each other, is the manner in which we prospect.

Other professions typically have firms where growth is based on having need (either having more business than they can handle or a specific need going unfilled).  Veterans try to hire good people to fill these needs and help them be successful.  The firm generates enough business to help get the newbie established in their practice.

In contrast most new advisors are hired by national firms that are growing for growths sake, regardless of market needs or competition.  The national firms hire anyone that can pass the 7, throw them against the wall and see who sticks.  You're in competition with everyone, and previously invested money is just as good as new money.  For the newbie starting out with no other support, it won't be good enough to simply put a sign out front, put an ad in the paper, and join the Chamber.  Instead, those that are successful have to be proactive.  Cold calling, mailing, doorknocking.  

People roll their eyes because they are sick of being solicited.  Its coming from the brokers, banks, and insurance companies.  Everyone wants to sell you investments. 

Apr 30, 2007 5:45 pm

Great answer Vagabond…i think you hit the nail on the head…perhaps additionally its the fact that our service is more like a luxury good that folks dont “have to have today,” (at least from their point of view), but many of those who do convert become very happy…and then the referrals come…if you can survive till then

Apr 30, 2007 6:02 pm

[quote=BankFC]

The better solution is to offer a guarantee of below market returns net of your fee?

[/quote]



Isn’t that what annuities are for?



More seriously, the best anyone can consistantly offer is market returns less a management fee. To have below market returns takes extra effort, and usually costs more in management fee’s.
Apr 30, 2007 6:20 pm

 More seriously, the best anyone can consistantly offer is market returns less a management fee.

I can offer better.  First of all, I never talk about rates of return or beating a specific benchmark.  Clients are not looking for a 12% return or looking to beat a specific benchmark.  On the surface, they may be asking for these things, but not really. 

Dig a little deeper and you'll find that the client wants to send their child to college, retire at age 60, protect their income if they can't work, pass down wealth, etc.

What I offer my clients is a better opportunity to acheive these goals.  This is far better offer than "market returns less management fees".

Apr 30, 2007 6:21 pm

[quote=mikebutler222]It
isn�t just outside threats to us, it�s how quickly some of us will
impugn the integrity of others in the business in order to try to gain
an advantage in the perpetual competition.
[/quote]



If other players  worked to a high standard,  this would be
very hard to do.  I.e  CPA’s have a damn hard time taking
clients from each other based on quality of work. <o:p></o:p>


[quote]People who are enamored with passive investing will quickly question the integrity of the active management contingent.[/quote]


I'm sure active managers have the best of intentions, I don't question their integrity.


It's just that performance is non-persistant at best, and often much worse than passive benchmarks. S&P SPIVA  survey's show that in general 80% of active managers with the SPX as thier bench mark under perform it.


Thus recomending active management, when you get a kick-back (sales load/trailer), is dishonest.


 

[quote]Pogo was right�. 

[/quote]

Firstly, ignore Bobby Hull. He is a troll. Last month he was the ultimate annuity shark, this month he is Operation Rescue.


Apr 30, 2007 6:25 pm

[quote=AllREIT]
More seriously, the best anyone can consistantly offer is market returns less a management fee. [/quote]

I know the fans of passive management like to say that, and they like to base their claim on statistical studies that always involve the term "on average" (yet they love to ignore the above average outliers that are far more common than they like to concede), but it simply isn't so.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Apr 30, 2007 6:26 pm

[quote=anonymous]

 More seriously, the best anyone can consistantly offer is market returns less a management fee.

I can offer better.  First of all, I never talk about rates of return or beating a specific benchmark.  Clients are not looking for a 12% return or looking to beat a specific benchmark.  On the surface, they may be asking for these things, but not really. 

Dig a little deeper and you'll find that the client wants to send their child to college, retire at age 60, protect their income if they can't work, pass down wealth, etc.

What I offer my clients is a better opportunity to acheive these goals.  This is far better offer than "market returns less management fees".

[/quote]

What you are talking about is asset allocation, risk profiling and time horizons. After the smoke clears: it is about investment performance that can attain those goals.

The upper bound on sustainable investment performance is market returns less management fee's.  The lower bound is strong technical support at zero.


Apr 30, 2007 6:38 pm

[quote=mikebutler222]I
know the fans of passive management like to say that, and they like to
base their claim on statistical studies that always involve the term
"on average" (yet they love to ignore the above average outliers that
are far more common than they like to concede), but it simply isn’t so.[/quote]



The outliers are exactly that, outliers.



That means they are rare cases that don’t reflect the typical results.



If you could pick outliers a priori then you would make alot of money . But you can’t do that. Finding them post hoc is very easy. The typical results of active mangement is underperformance.



<span =“a”>www.spiva.standardandpoors.com/

<span =“a”>

[quote]Over longer time periods, indices continue to exceed a majority
ofactive funds. Over the past three years (and five years), the S&P
500 has beaten 65.7% (72.2%) of large-cap funds, the S&P MidCap 400
hasoutperformed 68.6% (77.4%) of mid-cap funds, and the S&P
SmallCap600 has outpaced 80.2% (77.7%) of small-cap funds. (Reports 1
to 5)[/quote]



The numbers get much worse over longer time spans. And perfomance skew makes this all much worse, since the beats tend to be small, and losses often impressive.






Apr 30, 2007 6:49 pm

[quote=AllREIT] [quote=mikebutler222]It isn’t just outside threats to us, it’s how quickly some of us will impugn the integrity of others in the business in order to try to gain an advantage in the perpetual competition. [/quote]

If other players  worked to a high standard,  this would be very hard to do.  I.e  CPA's have a damn hard time taking clients from each other based on quality of work. [/quote]<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

I submit most people trying to win business on “quality of work” arguement couldn’t if they told the truth, the whole truth and nothing but the truth. It’s only by shading the truth and cutting corners on all the qualifiers of the evidence they use to base their assertion that they attempt to make their case.

[quote=AllREIT] [quote=mikebutler222]People who are enamored with passive investing will quickly question the integrity of the active management contingent.[/quote]


I'm sure active managers have the best of intentions, I don't question their integrity.


It's just that performance is non-persistant at best, and often much worse than passive benchmarks. S&P SPIVA  survey's show that in general 80% of active managers with the SPX as thier bench mark under perform it. [/quote]

You and I both know that even if you ignore the 20% (and that survey’s based on MUTUAL FUND active managers, not “active managers”) that DO outperform the average (and why not, instead of accepting the average, use that 20%?), the survey includes managers that aren’t even attempting to outperform the average because their aim is a lower beta, or income. It’s a wildly misleading claim. “In general” is a loop-hole you could drive a semi through.

That claim has even less validity when you’re, for example, looking at managers that accurately should be benchmarked against other indexes, like those competing with the EAFE or the Russell 2000. Absolutists in the passive camp also never bother to attempt to tackle the fact that serious money in this country (endowments, trusts, pension plans) uniformly use active management and passive in a complimentary manner. Perhaps it’s because the they’re-crooks or they’re-foolish lines don’t ring as true when the targets are sophisticated trustees of large pools of money.


[quote=AllREIT] Thus recomending active management, when you get a kick-back (sales load/trailer), is dishonest. [/quote]

As I said, you are impugning the integrity of your competition, and on very, very shaky empirical evidence. It’s amazing how often passive investment types try this “dishonest” route without bothering to detail to the client/prospect how many caveats there are in their “active managers under perform” claims. I’ve yet to see someone who uses solely active management or someone who employs both try to make the “dishonest” assertion about indexers.

 

[quote=AllREIT] [quote=mikebutler222] Pogo was right. 

[/quote]

Firstly, ignore Bobby Hull. He is a troll. Last month he was the ultimate annuity shark, this month he is Operation Rescue.  [/quote]


You’re right about <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Hull, but I was thinking of the cartoon character Pogo and his assessment about who the real enemy is.

Apr 30, 2007 6:57 pm

I think the big problems with public perception of our jobs/industry are several.

1. People really don't understand what it is that we do.   When I tell someone that I am a financial advisor they immediately think.... stockbroker, shark with a dorsal fin.  They don't think estate planning, tax planning, portfolio construction, asset allocation, life insurance, business planning or any of the other things we do.  They only think product pushing of the stock d'jour.

2. No value is placed on the activities that we do that are not directly associated with trading and activities that people don't understand.  People are inherently cheap and don't want to pay for things in which they don't see value.  The constant harping by the ETrade type of commercials on low fees only reinforce the idea that we are overcharging for not doing much of anything.

3. There is no understanding of the level of education and on going training that is required to be able to be a "good" financial advisor.  We are charging not just for the current activity of buying an investment but also for the years of time spend in obtaining the knowledge that we need to be able to advise.  Just like a doctor or lawyer who is recoveing the cost of their years of education.  Clients are surprised when I discuss the ongoing training that is required by the various licenses that I hold.  The time commitment and costs are never made apparent to the public.

4. It is much more interesting to make a movie about our industry like Wall Street than it would be to follow us around for a week with a camera to show what our lives and jobs are really like.   Pretty boring and mundane.  Because of this bad publicity, the public thinks we are all like the "guys" in the movies.  The same way they think that all Italians living in New Jersey are part of the Soprano's mob.

There's more.  But, personal experiences and stories about "bad" advisors, who do nothing but product pushing and no real follow up advising  are probably the most damaging to our profession.