“Don’t Hate The Player, Hate The Game”

If you are a client of an advisor at a major wall street firm like Merrill Lynch, Morgan Stanley, Wells Fargo or UBS, please be careful.  Many of us at Greenspring started at one of these firms and while there are some great advisors there, the game has been set up against you in many ways.  Reuters published an article about a new recognition club that Merrill Lynch is offering to its brokers that are it’s highest level producers.  Those who sell the most products and earn the highest levels of fees are rewarded with trips, rewards and choice picks of clients that are left behind after a broker is fired or leaves the firm.  

These are juicy incentives that are all earned by earning more money off of their client’s investments.  That’s why you have to be so careful.  They set up the game so that advisors at these firms are enticed to sell you products (often high commissions ones), not help you grow your assets or achieve your goals.  Besides the commissions and focus on product sales, there is one other factor that should be discussed.  From my personal experience, when you put a group of highly competitive and aggressive individuals into a sales contest, many let their competitive side take over, even at the cost of the client.  These big firms actively look to hire these personality traits because they know it can translate into higher sales for the firm.

I don’t want to paint all of these advisors with this broad of a brush, but as I mentioned the game is set up against the client.  We believe investors who are looking for an advisory relationship should spend a good amount of time understanding the incentives of their advisor.  While everyone needs to earn a living, we believe a much better alternative is an environment where what the client buys has no bearing on the advisor or firm’s compensation.  In this type of setting advisors are free to recommend the best possible products to clients since it won’t impact their paycheck.   

Information contained herein has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. It is not intended as the primary basis for financial planning or investment decisions and should not be construed as advice meeting the particular investment needs of any investor. This material has been prepared for information purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Past performance is no guarantee of future results.