• FiduciaryPath

    FiduciaryPath welcomes inquiries from individuals and firms who want to know more, and from the press.

  • Thanks!

    Your email was successfully sent. Your enquiry will be dealt with as soon as possible.

    error key Required fields not completed correctly.

Longing for Days When Banks Were Banks and Brokers Were Brokers

Is anyone else longing for the days when banks were banks — and you could even have a savings account that would pay you a decent yield on your money — which was (up to a certain amount) — government (FDIC) insured?  When and broker-dealers were broker-dealers and it was clear that they were selling something to the customers that dealt with them? When private banks had to act in their client’s best interest? And when insurance companies sold life insurance and didn’t pretend to be advisors, laying high-cost annuities on anyone who is naive enough to buy them?

This story in The FInancial TImes on surprise losses from trading at JPMorganjust reminded me how much I miss those days before the repeal of Glass-Steagall, the depression-era law that separated banks from broker-dealers. I think Paul Volcker is correct, that bringing back Glass-Steagall and separating banks, brokers and insurance companies would be in the best interest of most Americans. Short term, banks would feel some pain from being separated from the high-fee high-revenue broker-dealers that they are merged with now, but longer term they could do very well by adopting a fiduciary culture once more and putting their clients needs first, lending directly for mortgages and businesses, and helping people save.

Remember that?

To Increase Revenue Stop Selling

Forbes Contributor Mike Myatt posted an excellent article  entitled, “To Increase Revenue Stop Selling.” Bravo, Mike. Your point is important and holds especially true for financial services. This is a long term thinking vs short term thinking issue as well. And the reasons are practical as well.
Client acquisition is much harder than client retention.  It is much harder to bring in new client than to: put your client’s best interests before your own, avoid conflicts of interest, manage those conflicts you can’t avoind in the client’s best interest, help them diversify their holdings and disclose ALL costs to the investor — than to constantly have to bring in new clients.

In the discussion about extension of the fiduciary standard to brokers who advise individual investors, this is especially important. The antiquated culture at banks, BDs and insurance co’s is to reward the biggest “producers,”  while what investors need is the long term value added and problem solving you speak of. Short term, it is a big change, but long term, firms will have stickier, happier clients and a steadier revenue stream from a broader asset under management base.

A recent survey which I coordinated with fi360 and AdvisorOne.com shows tha the vast majority of brokers and investment advisors in the field want to put clients first–and if you think long term, it is in the advisor’s best interest to put their client’s best interests first at all times, as a fiduciary, than to have to look for the next sales customer.

You are absolutely right about changing the lingo as well. Think long-term client, rather than “prospect,” solving client problems and helping them meet their goals in a way that is in their best interest, and your client base will flourish. The investment advisor fiduciary model proves that this can be done. Do you know an investment advisor who is starving? No.

Banks, brokerage firms and insurance companies have to change how they offer advice, and they may have to separate advisors who really advise from salespeople who don’t have to act as fiduciaries — and those non-fiduciary salespeople ought to have a sales title, rather than one that implies an advisory, fiduciary relationship. Here is one place where the titles are very important.

Long term, changing the way these companies’ sales processes work can benefit their clients and themselves. The key is clients first, and long-term thinking.

Taxes and the 2012 Opportunity You Shouldn’t Refuse

Just as President Obama’s budget proposal has gotten everyone to talk about taxes, there are opportunities to make gift and estate arrangements that everyone should be aware of. Wealthy individuals and families still have an opportunity to use higher gift and estate tax exemptions to pass assets to their heirs if they act before these exemptions expire at the end of 2012.

Though, of course, none of us can predict when we will die, we can control how and when we make gifts. Individuals and couples with the foresight to make gifts in 2012 can take advantage of gift tax and estate tax exemptions that are scheduled to expire at year-end, so it would be wise to discuss these with your estate or tax strategist – and sooner rather than later in the year. There may be a rush to do this at year-end. The bottom line is, waiting to do this will result in your paying more taxes if, as scheduled, these temporary provisions sunset on December 31, 2012.

In 2012, individuals can make gifts of $5 million or couples can gift $10 million and not owe any tax on the gift. The tax rate on a larger gift is also lower in 2012, topping out at 35% for assets gifted in excess of the exemption. With some estate and gift planning techniques, investors can make additional trust arrangements and potentially shelter even more of their gift or estate from tax, depending on their individual circumstances.

But beware, if you wait, this favorable tax treatment for estates and gifts is scheduled to expire at the end of 2012.  According to Brett Ferguson, Senior Congressional Correspondent for Bloomberg BNA Daily Tax Report, “Obama wants,” to roll the estate and gift tax rates “back to the ’09 levels,” with a gift or estate exemption of “$3.5 million each and 39% top bracket,” for 2013.

Ferguson spoke on a tax panel at the Bloomberg Portfolio Manager Mash-up in New York on February 16, with attorneys Alan Gassman, of Gassman Law Associates, Stanley Ruchelman, of the Ruchelman Law Firm. Bloomberg reporter Margaret Collins moderated.

Higher Taxes in the Proposed Budget

President Obama’s Budget proposal, released this week, contains higher personal income tax rates, higher taxes on capital gains, and much higher taxes in dividends. The budget outlines rolling taxes back to the pre-Bush-Tax-Cut era, “to 2001 tax rates, a highest income bracket of 39.6% and a tax penalty,” Ferguson said.  Individuals making an adjusted gross income (agi) of $200,000 or couples earning more than $250,000 would pay 39.6% tax rate plus a surplus rate of 3.8%.

Perhaps what would hurt even more is a big hike in the tax investors would pay on dividends. Currently taxed at a top rate of 15%, as proposed, dividends would be taxed as ordinary income, just like taxable bonds, so the top rate would be 39.6%, and for individuals/couples earning in excess of $200,000/$250,000 the 3.8% surtax would kick in, the panel noted. The top capital gains would be 20% instead of the current 15%.

There is also a provision to eliminate the Alternative Minimum Tax, which generates $ 1 trillion, and replace it with a version of the so-called Buffett tax, imposing a minimum 30% tax on individuals earning more than $1 million a year, the panel said.

There is now a “sheriff’s mentality at IRS, Ruchelman said, now, it seems, “you make money and you give the IRS a preferred return. Before, you made money and hired people to drive the tax down as much as possible.”

Is all Financial Advice Alike? An Article for Investors

Is all Financial Advice Alike?

Is your advisor in the sales or the advisory business? There are very important differences that you need to know.

For many investors, finding the right advisor for finance and investments is not an easy task. How do you know how qualified and smart an advisor is? What do you need to look – and look out – for?

  1. Does your advisor put your interests first, at all times?
  2. Do you know exactly how much you pay for their advice?
  3. Does your advisor monitor your investments and let you know when changes need to be made?

If you answered yes to all of these questions, good for you! If you answered no, or are not sure, take heart – you are not alone. Read on!

Most investors are not well prepared for the investment role that they are asked to take on, whether it is deciding which which funds to select in your 401(k) fund or IRA, what to do with the money you’ve accumulated (whether to roll it over, what to invest in if you do roll it over, when – and critically, how much – to take out so that it will last as long as you live), or how much to put into a child’s college plan.

Whether an investor has great wealth to invest and a complex tax and estate plan to manage or a more modest goal, the right advisor can be an invaluable resource – and the wrong one can be the reason for higher investing costs, lost opportunities, and even failure to fulfill your financial goals.

The playing field is not level. Investments have become so complex that there is an enormous gap in knowledge between even the savviest (but non-professional) investors, and Wall Street pros. The gap between investors and investment professionals is similar to the gap between patients and doctors or clients and lawyers. You wouldn’t do surgery on yourself or defend yourself in court, would you? You entrust your medical and legal wellbeing to the doctor or lawyer. They must act in your best interest.

The same principle applies to your financial future – as an investor you entrust your money and your financial goals – your future – to financial advisors. It is reasonable to expect that the advisor(s) act in your best interest – and most investors do believe this. And there is the rub. Some advisors are required by law to act in your best interest, while others are permitted by law to act in their own, or their firm’s interest. They look alike, sound alike and many have the same title, so how can you tell the difference?

We are out to level that playing field. Knowledge is power! This blog kicks off a series of articles intended to arm investors with more of what you need to know, including how to find an advisor, on order to achieve your investing goals.

Armed with the facts, you can make better choices of advisors, clarify goals and understand some of the conflicts of interest in play on Wall Street – and that is essential if you are to achieve all you dream of.


- – – Kathleen M. McBride


  • Page 2 of 2
  • 1
  • 2