Ben Strubel, Strubel Investment Management
Charles Schwab recently released a survey of 201 brokers conducted late last year. While the survey was mainly centered around questions about brokers’ attitudes towards becoming an RIA or turning independent, I thought the survey highlighted a lot of good reasons why I believe the Spoke Fund® model I use truly is a superior way for clients to invest.
The most telling chart, I thought, was the one below. (Click to enlarge.)
More than 52% of brokers thought that corporate goals were taking priority over client goals and 38% thought that there was too much focus on selling special proprietary products.
The other interesting survey finding was that 79% of brokers found themselves having to explain more things in conversations with clients because of their connection to Wall Street firms. It’s no surprise that something like this is happening as Wall Street’s behavior has become increasingly egregious and the regulatory agencies are doing little to stop it. The never-ending stream of settlements over abuses tied to subprime mortgage products that were usually marketed to institutional investors are bad enough. But much of the bad behavior affects advisors’ clients as well. This recent settlement involving Morgan Stanley Smith Barney shows how the firm marked up corporate and municipal bond prices 3% to 8% over the market price when it sold them to clients (or marked down by 3% to 8% when it was buying them from clients).
Of course you may think your broker is watching out for you, but the survey shows that is not the case. While most brokers present themselves to clients as experts on managing investments, only one-third (or 34%) actually manage their client’s money. Most of the investment management work is simply outsourced to a third party (adding yet another layer of return-killing fees) or handled by the corporation for which they work.
It is surveys like these that show why I’m proud to be a Spoke Fund® manager and not a broker at a large Wall Street firm. My interests and my clients’ interests are aligned, and I can do what is best to manage their investments. More than that, unlike many advisors who work in the industry, Spoke Fund® managers are actually managing their clients’ money. Clients know who is ultimately responsible for investment decisions and that there are no hidden fees or hidden agendas.