Five years ago when I left the wirehouse world to open Triune Capital Advisors, I warned that the financial services industry was a cesspool and that over time, the truth would come out about some of the things that I saw that made me uncomfortable. I was vilified for it when I said it in a radio commentary. Indeed, one CEO of a very large bank called to tell me that, “he had lost all respect for me.” Well, vindication is no comfort. I hate being right about this. The industry, while smaller, is still a cesspool and the daily headlines serve to paint everybody in our industry with the same evil brush. The individuals in the industry, with notable exceptions, are not to blame. This is a systemic problem. The latest headlines featuring Alan Stanford, Bernie Madoff, and UBS Swiss bank account holders are indicative of what has transpired in the quest for greed’s gain.
It can never be good when incentive rewards are doled out because company goals have been reached. Rewards should be meted out when the customers have reached their goals as a result of our efforts. For this reason, Triune will never even consider a proprietary product; we do not have a grid system that rewards a financial advisor for higher commissions, or incentive trips based on how much of a particular product they sold. All of those things are common practice and that is what I mean by systemic.
None of those things, by themselves, are evil if they fit into a client profile. They are inherently evil if they do not. Much of the problem comes from a decision made years ago within the industry to cut back training budgets. One of the things that I am most grateful for are the years I spent early in my career working for J.C. Bradford. I distinctly remember saying to our training coordinator at the time that I felt dangerous because people were giving me their money to manage and I did not feel comfortable making decisions because of a lack of knowledge. J.C. Bradford’s answer to that was to send me all over the country on their nickel to every institution there was for schooling. I went to the Options Institute in Chicago, to the SIA School at Wharton, to the Owens School at Vanderbilt because they felt an informed broker had more value than a phone dialer. While some firms still do this, it is rare, and we, as an industry, need to get back to it. Financial advisors need to be able to evaluate product. If the advisors at Stanford instinctively knew that a 15% yield on a CD during these times was excessive, they needed to act on those instincts even though the firm might be telling them that it was legitimate. Of course, it was not legitimate; 15% in a 3% world never is, and that is precisely the point.
Even more interesting is how these guys got away with it for as long as they did. Money is powerful folks. If the SEC knew about Madoff in 1999, how did we make it to 2008? If the SEC was investigating Stanford 6 months ago, how did he escape? Somebody was protecting somebody. I am pointing out the obvious. There is something rotten in the state of finance in America, and the net result is going to be a total breakdown of trust in the system. This cannot happen, and it remains for those of us left who are populating the industry to heal ourselves. All of you, who feel trapped within this cacophony of corruption, get out now.
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