Blinded by Wall Street

A so called "Vice President of Investments" recently responded to an article online trying to state his position as a Wall Street Broker and how he was just as "fiduciary like" as Independent Registered Investment Advisers. What a bunch of baloney! He claimed his advice was suitable and he looked out for his customers. What a joke! Do you realize that most all Wall Street Brokers are Vice Presidents of Investments? This title in and of itself is totally misleading.

Fiduciary like? There is no such thing as "fiduciary like." This shows how blind these Wall Street Brokers are when it comes to doing the right thing. They have actually convinced themselves that selling products from the inventory of their Wall Street brokerage firm is perfectly okay. They have also convinced themselves that selling a client a Variable Annuity in a IRA account that pays them 6 to 8% commission and locks the client in for 10 years or more is perfectly okay. That is instead of opening a regular brokerage IRA account without a 10 year or more penalty for early withdrawal. Further, they convince themselves that it is okay to sell mutual funds that charge a 5.75% sales load, when no load funds are available to them to offer to clients.

A read an article online recently that said over 90% of the Registered Investment Advisers out there today are also affiliated with a Wall Street firm, a Bank or an Insurance Company. This means that there is only 10% of us true fiduciaries out there. So, look out. Nine out of ten people out there today giving financial advice is doing so in their firm's best interest, not yours.

In my humble opinion, the battle the fiduciary standard is going to end with Wall Street brokerage firms, Bank and Insurance Company clients getting the shaft. There is already talk on the street of how the fiduciary standard is going to be watered down to allow the same Wall Street revenue generating brokerage machine to continue. Banks and Insurance Companies will continue business as usual. People will continue to be given financial advice that favors:

1. The Wall Street firm first, or the Bank or Insurance Company first.
2. The Wall Street Broker, or excuse me...I meant Vice President of Investments.
3. I interrupt this list for an important message. I just realized that if you get your advice from a Wall Street firm that is owned by a bank and you are sold a Variable Annuity, then the Wall Street firm, the Bank and the Insurance Company all benefit before you. Yikes!!
4. Last on the list unfortunately is you.

It astounds me that anyone would ever obtain their investment advice from either a Wall Street firm, a Bank or an Insurance Company when the cards are stacked against them from the get go. Do you get your financial advice from a Wall Street firm, a Bank or an Insurance Company? Why? They do not care about you and they are not on your side. More importantly, they do not do what is in your best interests.

The good news is that there is a better option. Independent Registered Investment Advisers who have no affiliation with a Wall Street firm, a Bank or an Insurance Company. Sadly, we do not have millions of dollars that we take from clients and pay to Congress in order to get our way. We simply just keep plodding along hoping that one day, the people of America will wake up and realize that doing business with an Independent Registered Investment Adviser is the only place to obtain your financial advice.

Keep Your Assets. Take My Advice. Seriously.

Merry Christmas, Happy Hanukkah and Happy New Year. God Bless.

Brainwashed Thinking

I was at a meeting recently and I had some conversations with some insurance agents, some bank representatives and registered representatives. This was just idle chit chat about what I do and what they do. I was very surprised how brainwashed these people are by their affiliations. They have no clue what it means to be a fiduciary and deliver advice in a client's best interest.

The SEC is currently evaluating how to apply a fiduciary standard to these type of professionals. I can tell you, the SEC is facing an uphill battle.

One of the people I spoke with in my idle chit chat was an insurance agent. I told this person that I recently had a seminar with planning ideas to help seniors qualify for Medicaid Planning and Veterans Benefits. This person's first question was ..."what products do you sell to them?" Those of you who have read my book, or seen my latest brochure will know that insurance agents are compensated by product sales. Unfortunately, this is all they know. They know that they get paid by product sales. When someone asks..."what product do you sell to them?", then that tells me what they focus on with their clients. They focus on themselves. This of course, is contrary to a fiduciary standard of care.

My answer to to this person was that I did not sell products to them, but rather I did what was in their best interest and only charged a fee for my services. This person persisted with...'but, you have to be selling some products. What products are you selling?" I was really taken aback about how the blinders over this person's eyes are affecting their objectivity. I may be reaching a little bit here, but the concept of charging a fee and doing something in the best interest of a client seemed to be so far removed from this person's thinking that it was not even a remote possibility.

Quite frankly, I was astonished. Sadly, most of the people in my business work at banks, insurance companies or Wall Street firms. They have all the marketing dollars and political power. They are so brainwashed into the product sales mentality that they cannot even imagine what it takes to do something in a client's best interest. Like I mentioned earlier, the SEC is facing an uphill battle.

Another person that I chatted with wanted to know if I was in the Financial Planning Association. The FPA is made up of CFP's and other professionals who are mostly people who work at banks, insurance companies and Wall Street firms. Take a guess how excited I would be to run around with a bunch of people like these folks.

This person saw my CFP lapel pin and said that I should join. I then said, "Why?" He said, "because you are a CFP and the FPA is for CFP's." I said to this person, "you are going to have to do better than that." The attorney standing next to me laughed when I said that. This person, who was a bank representative by the way, went on to try and convince me of the wonderful educational opportunities and continuing education available. As a courtesy, I gave this person my business card, but I have to admit that I am kind of like Groucho Marx in this area. I will not join any organization that wants me to join. The truth is the FPA is in decline and they are losing a lot of members each year. Every time I run into one of these people, they are trying to convince me to join the FPA. If it truly was a good organization, then no one would have to recruit for it. This tells me that it is a lobbyist organization with a bunch of fat cat salaried people trying to justify their existence. I will not be giving them any of my money.

The last thing I want to do is go to a meeting where insurance company home office people are telling me how great their products and commissions are for insurance agents.

I am very comfy in my own little world of the fiduciary standard and doing what is in the best interests of my clients, thank you very much.

Later my friends.

FinReg or The American Financial Stability Act of 2010

We are almost there. Everyone has been waiting for the final version of The American Financial Stability Act of 2010 to become law. Shortly, we will be able to see it for ourselves and look for how it will impact the financial industry.

The early word is that the authority to require the fiduciary standard  for broker/dealers and investment advisers will be granted to the U.S. Securities and Exchange Commission (SEC). The current status of the fiduciary standard is that investment advisers (like my firm) are already subject to the fiduciary standard. It is the broker/dealers (Wall Street firms, Banks & Insurance Companies) who are not subject to the fiduciary standard.

The SEC will have to wait six months until a study is done. This is really an opportunity for Wall Street firms, Banks and Insurance Companies to fight it and or, time to get prepared for it. The law is supposed to give the SEC the power to implement a rule related to the fiduciary standard. The SEC has commissioners who vote on such any rules, if presented. So, there is no guarantee that after the results of the study, the SEC will make such a rule. FinReg only gives them the power to make such a rule, I believe. It doesn't necessarily make it etched in stone. Also, they normally put proposed rules out for a period of time before implementation and allow people to comment on them. Then, after the comment period, the SEC reviews the comments and determines the impact that making the final rule may have on the industry.

I wonder, if it is easier for Wall Street firms, Banks and Insurance Companies to fight the implementation of an SEC rule such as the fiduciary standard, as opposed to a law passed by Congress. There is a major difference if you catch my drift. It would be much tougher to overturn legislation, in my opinion. Do not think for a minute that Wall Street firms, Banks and Insurance Companies will not be flooding the SEC with comments on any proposed rule on the fiduciary standard. It is obvious they do not want it.

The main thing you need to understand is that registered investment advisers are already subject to the fiduciary standard and they (we) only wear one hat. So, if you see a lot of resistance to the fiduciary standard in the next six months, keep in mind that is not coming from registered investment advisers.

As I have blogged about many times before, the best financial advisor to hire is an Independent Registered Investment Adviser with no Wall Street firm, Bank or Insurance Company broker/dealer affiliations. Like me.

The Critical Difference - What It Means For Someone to Work in Your Best Interests

The Critical Difference of Working With Registered Representatives, Bank Reps, Insurance Agents and Independent Registered Investment Advisers - What It Means For Someone to Work in Your Best Interests

Most of America has money in retirement plans, investment accounts and insurance products. Think about it. If you go see a registered representative at a brokerage firm, or at a bank, or an insurance agent, no matter what level of experience or designations that they hold, odds are that they will want to sell you something. The reason for this is that they have a revenue quota to keep their office perks and their job. If they fail to reach their revenue quota, then they can lose their job. If you are sold products that benefit these registered representatives and their firms, then how does that help you? The truth is that your needs are always way down on the totem pole with this business model of Banks, Insurance Companies and Wall Street firms.

Independent Registered Investment Advisers do what is in your best interest. Not all of them will do it, however. How many Independent Registered Investment Advisers will work with you knowing that you do not have $500,000 to invest? If you simply tell them that you need help getting out of debt, then watch as they tell you about their account minimum of $500,000 and let you walk out the door.

A lot of these Independent Registered Investment Advisers only want to work with customers who have money and lots of it. The thinking goes it is better to have 1 person with $1,000,000 than 10 people with $100,000 each. It is easier to manage one person as opposed to ten people. Most all Independent Registered Investment Advisers work from this business model, with the exception of one that I know of and that is me.

The Taking Control Plan is how you should run your financial life. If you start at the right side of this Money Flow, then you are benefiting the firm selling you products. If on the other hand, you take my advice and start at the left side of this Money Flow, then you are benefiting you and your family.

This should be an "ah ha" moment for you. The light bulb should be shining bright now.

If you build the solid foundation first, by paying your everyday expenses, controlling your discretionary spending with the Under Control Accounts, then setting up Individual Savings Accounts for specific short term goals like vacations or home improvements, then you can begin to build a bigger emergency fund. In today's environment, forget 3 to 6 months of expenses. Today, I recommend 9 to 12 months of expenses in case of job loss, accidents or medical issues that would cause a longer strain on your financial situation. Once you have tackled all of these, then and only then should you move on to fully funding your retirement plans and taking excess cash flow and adding it to investment accounts.

Wall Street firms, banks and insurance companies want you to buy their stuff which means starting on the right side of this Money Flow. How does this help you if you have debt, your discretionary spending is not under control and you have no money saved for vacations? You have to be smart today. Really smart.

With The Taking Control Plan, you benefit first. Isn't this truly advice in your best interests? This is what I do for you.

Not me first, but you first.

Where Art Thou Fiduciary Duty to Clients?

I had an industry email flash come across my screen saying that the Senate Bill on Financial Reform is expected to pass tomorrow. Then, later I heard that the Democrats are in last minute meetings trying to secure the 60 votes needed for cloture. This prompted me to go view the latest version of the bill, Senate Bill 3127 with amendments.

We have heard within the last week that the fiduciary standard of care would be applied to broker/dealers with an exception for Variable Annuities. Looks like the insurance companies were able to get fiduciary duty exempted from their activities, because Variable Annuities are only sold by insurance agents who also have securities licenses. So, it is with great anticipation that I went to the Senate Banking Committee's web site to find the latest version of the bill.

I pulled up the latest version of S. 3127, then I did a search for the word fiduciary. Guess what? There is no mention of the word fiduciary in regards to consumer protection. I am not kidding. I am dead serious.

I guess since the insurance lobby won out on the Variable Annuity issue, then it must have ticked off the lobbyists for the Banks and Broker/Dealers. I'm sure they complained that the Insurance Company lobbyists should not be exempted from the fiduciary duty to consumers while they were subject to it. The Bankers and Wall Street lobbyists, it appears to me, have managed to get rid of the fiduciary duty to consumers  altogether. Banks, Insurance Companies,Wall Street firms and their lobbyists have once again destroyed any chance of getting fiduciary duty protections for consumers, in my humble opinion.

Of course, this is no surprise to me. As I have blogged about over and over again, it is impossible to have a fiduciary duty to clients if you have a revenue quota at your Bank, Insurance Company or Wall Street firm. If these firms had to live by a fiduciary duty to consumers, then they would not be able to require their representatives and agents to meet their revenue quotas. As always folks, it is all about the money.

As long as consumers keep trusting, or excuse me, allowing Banks, Insurance Companies and Wall Street firms to take their money, then they can all count on plenty of lobbying funds for Congress. Let's face the facts. Once this bill passes, it is extremely doubtful that we will see any other massive piece of legislation that will include protections for consumers. As always, Banks, Insurance Companies and Wall Street firms win and the consumer loses. If you do not believe me, look at the credit card reform legislation. Did it help consumers? No. It only helped the credit card companies.

Consumers can win if they make one minor change. Quit doing business with anyone affiliated with a Bank, Insurance Company or Broker/Dealer. Instead only do business with Independent Registered Investment Advisers like me. Independent means no affiliation with any Bank, Insurance Company or Broker/Dealer. None. Nobody. No one. Not a single soul. Not any. Not a single person. Not one iota.

Never again fall victim to the shenanigans of Wall Street. Hey, that sentence is on the cover of my book, Keep Your Assets. Take My Advice. Have you read my book yet? You can find a link to Amazon or Barnes and Noble at the top of this blog page, right under the picture of my book. Thank you very much.