Tag Archives: fiduciary standard


Making the Case for Financial Planners

There are a number of value-added services that can improve your financial future.  In the past we have written about the benefits of engaging a tax advisor and an estate planner. In this post we make the case for financial planners. We believe financial planning can make a huge impact on people’s lives. That’s why we have dedicated a number of our blog posts to the topic.  However we are aware that many people could benefit from having an expert to drill down further on the covered concepts.  That’s where a financial planner can really help. In our experience there are five primary areas where a financial planner can add value: Cash Flow & Budgeting Asset & Debt Management Helping […]

Wall Street Ethics: The Vanguard Test

Last week, Susanne Craig and Jessica Silver-Greenberg of The New York Times wrote a smoking-gun story about the lack of ethics at JPMorgan Chase. “[As JPMorgan Chase] became one of the nation’s largest mutual fund managers, some current and former brokers say it emphasized its sales over clients’ needs,” wrote the duo. This is a surprise to people? For decades, the traditional investment business, aka “Wall Street,” has thrived on a hard-core sales culture, with a legal and ethical credo that amounts to buyer beware. Of course, it’s hard for buyers to beware in such a complicated business with so little transparency. Every few years, journalists and regulators rediscover the problem with Wall Street. In a follow up story to […]

The ‘Toxic’ Culture At Goldman Sachs

Toxic Culture at Goldman Sachs

The very public resignation today by a Goldman Sachs executive makes it clear that Wall Street’s rotten culture extends even to the firm that has long been considered investment banks’ standard-bearer. Greg Smith resigned on the op-ed pages of The New York Times, in a letter that openly rips into Goldman Sachs, its culture and its top brass. He had been an executive director and head of the firm’s U.S. equity derivatives business in Europe, the Middle East and Africa. The reason for the blast? He says Goldman culture has degraded to the point that clients are seen as “muppets” and manipulated to produce as much revenue as possible for the firm. “I can honestly say that the environment now […]

Does Your Financial Advisor Think You’re Clueless?

Wealthfront’s CEO Andy Rachleff published a column last week on Forbes.com about how this generation of IPO wealth may help transform the business of money management. It offers a sharp contrast to the attitude that many Wall Street brokers take toward their clients, which was obvious in an article that ran last week in the New York Times (more on that below). In Hey, Silicon Valley Engineers, Time To Toss Out The Bankers, Andy wrote: This era’s IPO wealth is being created by young, Web-savvy engineers who have a deep-set aversion to traditional, expensive ways of doing things. They also have a deep understanding of how to use the Web to manage all aspects their lives (and possibly yours – […]

3 Common Conflicts of Interest That Could Take A Toll On Your Returns

The SEC tells investors, “before you hire any financial professional—whether it’s a stockbroker, a financial planner, or an investment advisor—you should always find out and make sure you understand how that person gets paid.” In this two-part post, we are looking at how clients pay advisors, AND how advisors get paid. It’s important to understand both if you’re going to protect yourself from being overcharged, or, worse, guided into decisions about your portfolio that benefit the advisor and not you. Just as it’s smart to question the doctor suggesting test after test for you at a facility he or she owns, it’s important to know how your advisor’s pay structure is creating incentives that may harm or help your portfolio […]

Advisor Pay And How It Affects Your Portfolio

The SEC tells investors, “before you hire any financial professional—whether it’s a stockbroker, a financial planner, or an investment advisor—you should always find out and make sure you understand how that person gets paid.” In this two-part post, we’ll look at how clients pay advisors, AND how advisors get paid. It’s important to understand both if you’re going to protect yourself from being overcharged, or, worse, guided into decisions about your portfolio that benefit the advisor and not you. Just as it’s smart to question the doctor suggesting test after test for you at a facility he or she owns, it’s important to know how your advisor’s pay structure creates incentives that may harm or help your portfolio in the […]

Why Investors Should Care About The Fiduciary Standard

Since taking office, Securities and Exchange Commission Chairman Mary Schapiro has repeatedly stated her commitment to raising the standard of conduct that applies to brokers when they give investment advice.  The goal is to ensure that the “financial advisors” employed by brokerages (including Wall Street firms such as Merrill Lynch and Morgan Stanley Smith Barney, insurers such as Allstate, and many other smaller independent firms around the country) meet the same basic fiduciary standard other investment advisors are held to when they provide advisory services. The fiduciary duty, in short, is a duty to act in the best interests of customers.  Although progress has been made, this common sense proposal still faces an uphill battle thanks to opposition from a […]

Why Disclosures Don’t Work

Last month, in a provocative op-ed in The New York Times, David Swensen, Yale University’s chief investment officer, lashed out at mutual funds. He said, in short, that mutual funds invest poorly and have fees that investors don’t understand, and that some of the brokers and advisors who sell mutual funds use “pointless buying and selling to increase and justify their all-too-rich compensation.” The Investment Company Institute, which represents mutual funds in Washington, D.C., struck back, suggesting Mr. Swensen had been led astray by his “hubris.” The ICI says the mutual fund industry already offers information and disclosures to investors. “Funds have reported their fees for decades and have published prominently displayed fee tables with a wealth of cost information […]

Don’t Choose Service Over Performance

Listen to any investment related commercial and you’re almost guaranteed to hear a sales pitch that promotes service rather than performance. You’ll hear a lot of buzz phrases like “we listen to you”, “we’re here for you”, and “you can trust us,” but you’ll hear nearly nothing about returns.

We believe the investment industry is conditioning people to focus on service because it’s not confident in its ability to generate outstanding returns. In September, Wealthfront commissioned a survey through Harris Interactive to better understand how the general population felt about the skill of its financial advisers.