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Tuesday, October 26, 2010

Still Think Your "Full Service" Broker is Objective When He Recommends Muttual Funds ?

from Financial Advisor Magazine my bolds and comment in blue
Brokers Flee Brokerages As Declining Assets Show Broken Model

...More than 7,300 brokers have left the four biggest full-service brokerages -- Morgan Stanley Smith Barney, Merrill Lynch, Wells Fargo Advisors and UBS Wealth Management Americas -- from the beginning of 2009 through June, according to financial services research firm Aite Group LLC in Boston and company filings.

Losing Assets

Some brokers have fled internal clashes from mergers during the financial crisis: Bank of America Corp. rescued Merrill Lynch four months before the Smith Barney deal. Others have been recruited by discounters such as Charles Schwab Corp. to join their networks of independent firms.....

While lacking the clout of big brokerages, independent firms boast of one advantage with clients: no conflicts of interest. Brokers at Merrill Lynch, for instance, are pressured to sell funds managed or approved by the firm because they pay a higher commission than those run by other companies, says Paul De Rosa, who worked at the brokerage for 26 years before co-founding his own firm, Gateway Advisory LLC, in Westfield, N.J., in January.

De Rosa set up Gateway Advisory as a registered investment advisor, which has a fiduciary duty to put its clients’ financial interest first when giving advice, according to U.S. Securities and Exchange Commission rules. RIA firms must also disclose conflicts. To avoid them, RIAs like Gateway typically shun commissions and charge a flat fee of less than 1% of assets under management regardless of the funds they recommend.

I do have one question however, why did it take this gentleman 26 years to figure out that there was a conflict of interest in the way his previous employer dealt with clients ? 

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