Wealth from Wisdom

The Untrustworthy Side of Financial Services

August 04, 2018
Wealth from Wisdom
The Untrustworthy Side of Financial Services
Chapters
Wealth from Wisdom
The Untrustworthy Side of Financial Services
Aug 04, 2018
Carson Wealth
Show Notes Transcript

65% of Americans do not fully trust financial services. On this episode, Ron and Paul discuss the negative side of financial services, and how you can avoid it.

Speaker 1:
0:00
Okay, and here's the legal Mumbo jumbo, the opinions voiced and welfare wisdom with Rod Carson or for general information only and are not intended to provide specific advice or recommendations for any individual to determine what is appropriate for you. Consult a qualified professional. All indices are unmanaged. I may not be invested into directly. Investing involves risk including possible loss of principle. No strategy assures success or protects from loss. Past performance is no guarantee of future results. Advisory services offered through CW m L L C an SEC registered investment advisor.
Speaker 2:
0:30
The stock market hit another all time. Records as much as $10 billion in social security benefits go unclaimed every single year. Federal Reserve announced that they will raise interest rates by 250 the skyrocketing cost of healthcare and retirement could now run 350,000 blending for retirement today is a whole new ballgame. It's loaded with challenges, obstacles, and trap doors that you can do this and we can be your guide. Welcome to wealth from wisdom with Barron's hall of Fame Advisor, Ron Carson. Straightforward and objective advice and how you could make your money go further in retirement. And now here's your host, Ron Carson. 65% of Americans do not fully trust financial services. Think of that number 65%
Speaker 3:
1:19
when you think of financial services, it's every part of every day. More importantly, it's security. Think of Maslow's hierarchy of needs. After food and shelter, what do we most desire? It's security, financial security that we can take care of those things. And lately Morgan Stanley, Merrill Lynch, especially Wells Fargo, have been in the news. So you know, thanks. Have really not changed that much since all the regulation, all the embarrassment, it's been business as usual at some of these establishment. They're not committed to total transparency. They're not committed to accountability and they're sure the heck are not committed to putting the client's interests first and working backwards. Today I want to talk a little more about wells Fargo. You've seen the big re established campaign, it says established 1852 reestablish in 2018 with a commitment, a recommitment to you. Hi, I'm Ron Carson with Walton wisdom with my cohost today.
Speaker 3:
2:19
Paul West and we're gonna just talk about the ugly part of financial services and Paul, it's so frustrating. I'm sure for the average consumer out there to go, what the heck's going on? I mean wells Fargo, here's a company been around forever. You for for many years there were like this is the best of the best and the way they take care of internal stakeholders, external stakeholders. They, here's this campaign establish an 1852 a REIA salvation in 2018 with a recommitment to you and based on all the news it's broke since that campaign. Maybe it should have read established in 1852 and we establish a way to screw you and recommit to that. I don't know, I don't think that made her a blurb on the department. But listen to this, this is how bad this is. This is the tagline from Wells Fargo's new advertising campaign which is designed to move the paint bank from the past and it's huge fake account scandal cause by the immense pressure put on it's bankers to sell.
Speaker 3:
3:23
Indeed wells made a point of saying that product sales goals are gone for its branch. Bankers here notice that they said gone for one segment of its huge organization but the upper us salon a different division of Wells Fargo. It's wealth and investment management division. The intense pressure for sales is alive and well according to hundreds of pages of internal documents reviewed by Yahoo Finance in interviews with former employees and by the way, even since this was written, more news broke on Friday. In fact even as well as was the emphasizing sales goals within the community bank. The pressure was being ramped up on its managers even more to move clients and to high fee products so they could earn an additional bonus. When wells announced this program, they had allocated $250 million because they thought these guys are really going to push clients, their best clients into these high fee products. How much do you think that, did you read the article? Absolutely. 750 million. It was as from Wells Fargo's perspective. Um, the number was way more successful, which just means that many clients and my mind were sold inappropriate stuff that we're not in their best interest.
Speaker 4:
4:47
Now. I mean, I get it. This world is built on trust, right? So I'm sure when all of these clients have sat across the table with the specific person at wells Merrill, anywhere else it's been, you know, find immensely lately. Um, they don't know the truth. And what's sad is, is that people aren't finding out the truth and what's he probably worse yet. I actually am more concerned now, Ron, well here we are in 2018 and take, you know, Merrill Lynch and Bank of America was fined $42 million. I think about that $42 million for their practices in March. And people aren't even, that's not even like a big story, right? Anymore. I mean, and that's horrible. Yet breaking news is all about, you know, try and do, talk about the political environment, all of this. But this is actually what really impacts consumers. All of you listening today, if you have your account at a major bank or Wall Street based from you, you have the right to find out exactly what your pain. You need to ask them. And don't ask them to tell you verbally because guess what? There's some sugar than I put on an ask them to send it to you in writing. Yeah,
Speaker 3:
5:52
we've talked about this before. By the way, Paul, don't ask, what am I paying you? What are the total fees and costs that everybody is taken? Cause that way they've got to disclose other divisions of Wells Fargo, whoever. Do you remember? This has been years ago, Paul, and you may be, you're younger than me. You may not remember this, but there was um, an auto and some of you listening when remember that whenever the auto was hit, the gas tank was blowing up. Yeah. Cause this was it. The Ford Pinto, is that okay? Before the Pinto and when they reviewed internal documents, it was well known that the manufacturer knew of this issue and said, you know what, the costs of litigation, it's the cost of fixing it. It's going to be far greater than the cost of litigation. So let's go ahead and let people die because financially we're ahead to do that.
Speaker 3:
6:44
Now I want to take the same comparison to financial services today. So here we are. I don't know what's truly going on in these boardrooms, but here's what I imagine Merrill Lynch and Wells Fargo, they're saying, you know, it's 42 million or Merrill Lynch, Bank of America, it's three two years ago, 362 million wells Fargo, a billion dollar fine. They're looking at it going, you know, relative to how much money we make by these practices. This is nothing. So the regulators in my mind me to make it so painful. It's like when Smu cheated and with football it was a death penalty, right? Why do we not, I mean too big to fail. The, the, I think government regulation and the regulators, they don't want to put these companies out of business, but can't they penalize them so hard like Smu that they don't go out of business, but financially it wipes 80 90% of their equity price away.
Speaker 3:
7:42
It should because that's going to get everybody else's attention to say, you know what, we can't be doing this stuff. Yeah, well, I mean there's gotta be ways to approach her arm. And I was actually looking at the numbers. So since the 2008 financial crisis, Bank of America has paid 76 billion billion with a B in fines in the last 10 years. I mean, and yet they're still operating. It's still making money. Well, where's that money come from? You the consumer. And by the way, I'm okay with them being profitable, Ron. I mean, that's what they're in a for profit business. They need to stay open for the benefit of consumers and clients. But when is enough enough through all of this, I mean, look, you've got JP Morgan Chase find 43 billion Citi group, 19 billion Deutsche Bank, 14 billion. And they just, it just keeps happening and happening over and over again. And when are consumers going to have enough? When are they going to walk away to realize, and I think Ron, we're actually hopefully for our listeners today, educating them on what a better business model is. And you and I've talked about in the show, one of our best comparisons to people is that people finally figured out going to the movie store and getting a movie at blockbuster and paying those ridiculous late fee charges and all the pain that went through it eventually evolved into
Speaker 4:
8:56
the Netflix model models. Amazon prime model. Well, if you don't understand what an independent registered investment advisor is, that has a fiduciary interest to put your interest further owns and to disclose their fee schedules to you and how those work, that's the new model. And that's what you're seeing people slowly shift into is just taking time. And I hope on the welfare wisdom show we can keep educating you those things to go ask your advisor. So if you're at UBS or wells Fargo already publicly traded, you know, wealth management firm, ask them what their fees are and what their expenses are and how much they make. I think you're going to be surprised, but more importantly, if they're not willing to share it with you, you got a major problem. And I'll give you another example. One of the things I hate doing is dropping my car off at a dealership or an auto repair service because I got to know he's going on.
Speaker 4:
9:46
I immediately feel like what's going to happen next? They're going to give me a quote back and I have no idea if it's right or wrong because I don't know enough. I just, I'm not trained in that. And people look at us across the table or on his, they were trained in financial services, so we should be giving them what's best. But at the end of the day, if your financial advisor, I'm gonna actually say your financial broker works at a firm that has to report quarterly earnings. They're financial interest is to their stockholders and shareholders versus it is actually to you as a client of the firm. That's a major, major
Speaker 3:
10:20
conflict. And I wouldn't say that's always the case, but that sometimes is, I mean that's a big red flag you want to watch out for. And when did you say, how over what time period of Wells Fargo pay those fees? Uh, well it's the last 10 years. Bank of America, if I was at the 76 billion, 76 billion, $7 billion here, what's their stock price down over that same period of time? It's gone up substantially. So again, just to make the point, people are looking at it going, you know what? No big deal because the, the, the cost of complying and getting fined, um, costs and compliant with all the regs, rules and regs are a lot less than just continuing to do what we do. It's just not painful enough for them. And I want to give a huge shout out to the whistle blowers. So just recently.
Speaker 3:
11:07
Absolutely. Yeah. These whistle blowers from wells Fargo. I'm actually sent letters to the sec in September for Wells Fargo is financial advisers and Arizona sent a letter to the Justice Department and the sec detailing what they said were longstanding problems with the bank's dealings with wealth management customers in January to more financial advisors in Orange County. California sent a formal complaint to the SEC alleging similar problems. The Arizona letter, which hasn't been previously reported, led to the investigation by the Justice Department and this was on the Wall Street Journal and this is okay people and I know wells Fargo for you, Wells Fargo advisors that are out there, um, you know that you, many of them care about their clients and they are as appalled as anybody that this is going on and they don't want to be a part of it anymore. So for the whistle blowers, that's great news. Thank you guys for any business though on fashion and for and for the advisors that'll still there.
Speaker 3:
12:10
Why the heck are you there? Why would you stay in? This goes for all these conflicted business models because we care and love about you. I know, but money, money, in this case, you're going to make enough. You do what's right for the client. You make plenty. Yeah. How do you sleep? You make plan. Yeah. If you want to get a second opinion and you want to really see what you're paying, all the fees and costs, give us a call. Eight eight eight four nine 85 13 that's eight (884) 900-8513 there's no cost. There's no obligation, but be informed. Understand what all the costs and fees aren't. If you're at any of these firms we just mentioned you want to know? 888-4985-THIRTY and I'm Ron Carson with Paul West and you're listening to wealth and wisdom.
Speaker 2:
12:48
Trust, transparency, accountability. These are the values that drive Ron Carson and Carson. Well, you're listening to wealth from wisdom with Baron [inaudible] fame advisor, Ron Carson. He's a published author and has been featured in Forbes, investment news, the Wall Street Journal, CNBC, and more. Now back to, well from wisdom with Barron's hall of Fame Advisor, Ron Carson. Hi, I'm Ron Carson with Paul West and we're talking about trust, transparency, accountable accountability,
Speaker 3:
13:17
and we're really talking about the 65% of Americans that don't fully trust their financial advisor. And Yeah, we've picked on wells Fargo, but man, they deserve it. Not only did they have all kinds of conflicts, issues, fines. Then they came out with this huge campaign that the re committed only to find out that they started focusing there inappropriate behavior and other parts of the organization. Wells Fargo financial advisors, Corey and the Wall Street Journal article came out on Friday, push clients at a product that generated additional fees, often move clients assets between different products or investing platforms to generate more revenue and bigger bonuses according to two to more than two dozen former employees and documents reviewed by the Wall Street Journal advisers, frequently targeted wealthy clients and Wells Fargo's private bank, sometimes staring them into alternative funds of which wells Fargo was the majority owner allowing them to collect another helping of these. Yeah, these are their best clients and they're asking them to go out and switch them into products actually owned by Wells Fargo. And sometimes these funds, I had different names. So they, unless you read the disclosures and that's where wells Fargo is going to come back and say, a matter of fact, they do say it. There's a comment from wells Fargo. It says we have supervisory processes and controls in place. If a team member were to act in a manner not in line with our values
Speaker 4:
14:52
and our policies, we would take appropriate action. Well what are your values and policies? It sounds like your values and the policies or just that you've demonstrated that beyond a doubt. So she doesn't say doing what's right. She just says values and policies. What are their values and policies all? Hey Ron. Hey Ron, you've made some great points here. So, um, one thing I think is interesting is most people don't know. There's actually a consumer financial protection bureau and I think that's great. And I think if somebody has got to be monitoring the stuff, so actually the director, this is a quote from Richard Cordray said, unchecked incentives can lead to serious consumer harm. And that's what has happened here. That's his quote that he said about this, and I think it's true, is ultimately when you put customers' interests last instead of first [inaudible]. It's always going to happen and I like I gave you an example on our prior segment it same way you feel like if you're going to a car repair shop where there's a dealership and you feel like you're getting screwed over, it's probably reason why Carmax, some of these other places, even though they're probably actually a little bit more to buy a car, you don't feel like you're getting screwed over.
Speaker 4:
15:56
Why? Because they're being transpired. Showing that the price Max process, by the way. Yeah. I mean why? Why do we pay probably more money for Amazon prime then we actually even ship every year or what we pay for. We get, you know, their audio service and they're streaming content. Why? Because we know exactly what our fees are. They show him there. We understand them. We don't have the feeling like we're getting screwed over. There's something that actually happened recently. I give an example of many people shop at Costco. I like Costco. It's a great store. It's got a lot of stuff and one of the things inside of there is they actually have a policy that if something that you bought from them, I think it's like the next 90 days, if it goes down in price, they'll actually send you a check for the reduced amount.
Speaker 4:
16:38
Isn't that the best? Yeah. How does that make you feel? Safe, secure. Well like someone's watching out for your interests this, right. So what I probably leave there, no, because it's, I know that I don't have to worry about spending all this time second guessing pricey or go anywhere else and I feel great as a consumer. Um, you, you don't want a feeling of going somewhere. Actually I shared this story before, so we actually had a new family come in, run and we are talking to them and they said it's almost more nerve wracking to come in and sit down in a financial services office than it is going to the doctor. And I was like, wow, really? You know, and I actually got a pit in my stomach and being in this profession and it was because why? What we're talking about today's show, the fines and the things that happen, they have fear so they are walking in the door with the emotion of fear versus excitement, our preparedness or desire to move forward.
Speaker 4:
17:39
It was like, Hey, I better check for all of these traps and landmines instead of looking out in the future and seeing, you know, clear blue skies and the ocean. It was instead they saw stormy clouds and it's our job to help educate people what the real world really is because there's so many cool things they can do, not share it with you. I think it's something I've heard you say recently. I really like Ron is, you know, if you're working with a professional team, if you need your taxes done, what do you do? You go to a CPA. If you need trust services, you go to a trust representative officer. If you go to an attorney, if you to build your estate plan, do you need research? You need someone who's got a CFA. If you need someone who's going to do your financial plan for you, they need their CFP.
Speaker 4:
18:22
Like if you're going to work with all of these professionals, and I'll give you another hidden, I'm going to call it secret here of the financial services profession. So to become a financial services professional, all you need to do is pass some exams. There is no bar set of a set amount of knowledge and information you need to have. They're called the series seven and then if you're going to get licensed in your state, there's a 63 there's an advisory licenses and won't bore everybody on that radio, the details, but that's no different than somebody getting their real estate license. Does that mean you've learned so much over the years? I call it, it's a license to sell and you should more be worried about somebody who's got either experienced as part of a large firm. And that's why larger firms like large advisory firms that are baron's hall of fame TVs are a part of Forbes list.
Speaker 4:
19:10
They've been vetted and tested over time from their clients because they provide advice and they've gone through those things before rather than if you're working right now with an independent financial professional, which I think is still better than somebody who's tied to a Wall Street firm. If there's only one, two, three people in those offices, you've got two problems. One, what if they're not here? They have a succession problem. Issue to Ron is you're stuck with one or two people's opinions on what's right in the world and they better be guessing, right? Because I don't know how they're making an investment decisions, how they're doing your financial plan, how I've eaten. You help think through taxes because you cannot be, I mean, think about any business you don't. You don't see doctors who can be specialists in everything. You need a radiologist, you need this, you need that. You can have a general physician, but somebody has got to be able to really target those specific needs.
Speaker 3:
20:08
Can you imagine if you're going to get a surgery and he said, okay, I'm going to do this. Okay, hold that. I'm going to go check your anesthesia. Okay, hold that. I'm going to go run an ex Frey. Hopefully everything goes okay. Well, I'm not paying attention to the stuff you would be walking out with. Okay. I want to play devil's advocate here. So you just said, let's go back to wells Fargo, wells Fargo, big organization. They have all kinds of CFPs and jds and CPAS and trust officers. Buffet has a great quote and I might be butchering it a little bit. He goes, I only want to work with people that are smart, high energy and ethical. And if they don't have the third one, the first two will kill Ya. Yup, they're smarter than I energy. Let's come back to wells Fargo.
Speaker 4:
20:49
They have all these things. So, but what's the culture of the top? Is it about the consumer or is it about profit margins? Here's another quote from Wall Street Journal. Wells Fargo often mandated man not suggested mandated quotas for riskier alternative investments such as private equity Hedge Fund. We're godless of whether they were appropriate according to employees and internal bank documents reviewed by the Wall Street Journal. Wealthier clients were often placed in the g a I agility income fund or the Ga I Corban multi-strategy fund, which are majority owned by Wells Fargo from which the bank collected additional fees. So you could have all those things, but that's not enough. You need to stop with very top as w we have a client bill of rights, how many organizations have a client bill of rights. This is what you should expect. What is the culture of the organization? And it starts from the very top.
Speaker 4:
21:49
What is it that that were the leadership group of any organization? Why are we in business? Why do we were here at the Carson Group. It's a consumer movement. We're consumer advocacy group, right? We're in business to do well. We're a community based organization and we always start with what's in the best interest of the client. We stand up for the client. Yeah, well I would say Ron, I think it's, it's the old adage, but it's, it's, it's interesting to me that so many people don't follow it is you have to have the commitment and the, you know, really the vigor to make sure you tell people what they need to hear versus what they want to hear. And there is a huge difference there. And I know we didn't talking about, you know, some of the challenges in the profession, especially from these big Wall Street firms.
Speaker 4:
22:33
I'm going to read a quote to you, and this is fascinating to me. So this is from the New York attorney general, Eric Schneiderman said, Bank of America, Merrill Lynch went to astonishing. They actually put the word astonishing lengths to defraud its own institutional clients about who is actually seen in fulfilling their orders. I mean, just another example of, hey, what's really happening there? When you create conflicts of interest, and that's where we talk about on the show, the f word of fiduciary. And somebody's got to tell you what you need to hear, not what you want to hear. And they've got to tell you the truth and how things are impacted. So there's another question we told you in a prior segment, you know, send you an email to your advisor, ask them what fees are they earning, what fees are the firmer need to ask them. Are they a fiduciary, do they have a legal and ethical obligation to put your interest first? Cause that goes right back to your buffet quote. If they don't have that one the piece, we have 10 questions to ask your advisor, right Paul? Yeah. They can call and go to our website and get it if they want. So advisors were also told that they hit it had to hit a target and if not, they were removed from branches. Again, this is according to a letter sent to the regulators. Uh, and this is on the Wall Street Journal.
Speaker 3:
23:46
So when they are put under extreme pressure, now you have to feel for some of these advisors that have families they had to take care of because if they didn't do what wells Fargo was asking, then they may have lost their ability to actually put food on the table. It just a poisonous, terrible environment to be part of. We would love for you to really take a hard look, get a second opinion on everything that you're doing and it's never too late to get a second opinion. You gotta be your own advocate. Understand what are you getting? Are you getting planning alpha? Can you see clearly your advisor is doing what they're doing and helping you gain actual benefits beyond a doubt, the same and influencing behavior as it relates to investment performance. How much risk are you actually taking? We can do that. Where Barron's hall of fame team, we're really good at what we do and we would love to give you a second opinion on everything that you're doing as it relates to planning and investing and we do have the jds, a CPAS, the trust, all of that right here at the Carson group and everybody is actually there and they're talking to one another.
Speaker 3:
24:57
Give us a call, eight eight 84985138884 nine 85 13 today's the first day of the rest of your life. No matter how many years or days you have left, make a commitment to understand where you're at and are you getting the most value that you possibly can. Eight (884) 900-8513 I'm Ron Carson with Paul West and you're listening to
Speaker 2:
25:20
well, Flynn was done. He seemed good times and bad times and he's got the gray hair to prove it. You're listening to wealth from wisdom with Barron's hall of Fame Advisor Ron. He's a published author and he's been featured in Forbes, investment news, the Wall Street Journal, CNBC and more now back to wealth from wisdom with Barron's hall of Fame Advisor, Ron Carson. Welcome back to wealth and wisdom. I'm Ron Carson,
Speaker 3:
25:44
cohost Paul West and today it's a totally different show. We like you are fed up, fed up with what's going on in financial services and the statistics are alarming. Somewhere in the neighborhood of 65% I've seen one, it said 67 another said 68 but way too many consumers just don't totally trust financial services and we're talking about all of the fines wells Fargo has taken it to, in my opinion, a new level of corruptness. You know, just after they had all the scandals and everything going on, then there's really additional report out, an article on Friday of the Wall Street Journal that it's even hit to me, it's even worse than any of us could have possibly imagined. Forcing advisors to move money, mandate advisors put in certain products that falls Fargo actually own 100% of the fund, um, or majority, I should say a majority of it. And then paying these bonuses based on proprietary products.
Speaker 3:
26:47
And in some cases, internal advisors have said it's a year of the annuity. It's like, go sell an annuity. They get a commission. Wells Fargo made additional money. There's a, there's a bunch of comments, Paul, that were part of this and I can't imagine the message boards or lighting up, but here's one. And this is a, to me, this is exactly how I feel. Um, it says, fool me once, shame on you, fool me twice. Shame on me. We've heard that before. How many scandals does a financial services company have to have before an individual says, maybe I shouldn't bank or invest with this firm. There are dozens of reputable firms who have not had these challenges. I wouldn't use this firm to make change for a dollar at this point, let alone trust them with my financial future. There's hundreds of messages like this and it that, that does boggle my mind. I mean because those, the Advi, the consumer think, well it's bad, but I haven't directly seen it or experienced it. And by the way, neither did a lot of other people. By the way, all of this stuff was actually handled. But if that is the culture of the organization, to me it's just a matter of time before you're going to have, you're going to negatively be impacted by it.
Speaker 4:
28:00
Now you definitely are on, I mean, and this is prevalent across a lot of places, unfortunately. I mean, here's another article about UBS. I mean UBS was fine, 3.5 million for overcharging mutual fund customers. Why? Because they didn't have mutual fund customers in the lowest share class. Possible lowest cost share class possible, which is agregious. So they actually had to give back the 18.5 million to customer accounts. So I'm glad they did it. But would they have done it unless they were forced to? No, not a chance. I mean, so this affected no 15,000 people and I'm sure Ron, there's probably, if we take that across all the different providers. So here's another lesson learned on wealth and wisdom. This is what we want to do. We want to educate you as a consumer. If you have a mutual fund and your advisor is managing that for you, send them a note.
Speaker 4:
28:47
Again in writing, is this the lowest share class possible for me and is this the right? And also ask them what is the expenses for holding that fund. I'm curious if you know about expense ratios and what those look like and how they actually impact your net return and by then it's okay to pay an expense ratio run. It does cost the company something to run that fund. I don't disagree with that, but you at least need to be educated and know what it is because I've been fascinated, especially inside of a four o one k plan. Somebody says, Oh Paul, I'm invested in the s and p 500 index and I'm like, well, you know, okay, great. You know that should be super low cost for you. I mean call it 10 basis points or 0.1% and I looked at it and it was actually a mutual fund from a mutual fund company and charging them 50 basis points to own all the s and p 500 funds, but they put it in a mutual fund instead of a low cost one.
Speaker 4:
29:40
I mean, so be careful though. You're think you are invested in a index fund. You may not be or it may be more costly. So as a consumer shooting an email to your advisor, your broker, whatever you call them, your person, and ask them those questions cause they're valued to know that there are a fiduciary. If they're not, you need to, you need to work with a fiduciary. By law, they're required to put your interests ahead of their own. Other than that, here's another quote from another wells Fargo Advisor. He says, the company emphasize sales to such a point. I felt like the salesman and the Glengarry Glen Ross, he says one former advisor, you've seen that, right? Yeah. It's a 19 or many listeners have salespeople are a sell or be fire pitch. It leads to breakins fraud. All kinds of ugly stuff too. For Advisors. Say they felt they were supposed to hide.
Speaker 4:
30:29
There's a shift at wells Fargo. The shift was from active personal management from the advisors too. Formulaic advising in two former advisors said they were supposed to hide the shift from clients with services could continue to be represented as highly personalized. The firm made it very clear that we could not discuss the fact that we were no longer managing these portfolios. One former adviser told Yahoo Finance. That remains one of the biggest ongoing secret secrets kept from wealth management clients to this day, not anymore. Another advisor who left after he felt his job, a completely pivoted to sales. He said, I was going to be a salesforce and representing that I manage a portfolio. I just couldn't live with myself. He said, I had 20 years at the, at the bank, he said, a wealth management platform trying to do best for its clients. Now it's just generating revenue.
Speaker 4:
31:20
And another, uh, his manager absolutely told him that they did not necessarily want them to lie to the clients, but they did not want them to disclose this. What's the difference? Right. I mean, come on. That's just so inappropriate. Um, and at all levels. So Ron, we're talking about we're going to bring on a new financial planner. As part of our team, we've been interviewing some people. I was just fascinated. I mean, here we are in Omaha, Nebraska. Um, you know, I feel like we're less of a Wall Street culture just because we're in the Midwest, but there's plenty of Wall Street based firms here. And this, this um, person in the interview process, uh, was telling me who by the way works for one of those Wall Street firms here in Omaha and said, I asked him, I said, well, hey, how are things going?
Speaker 4:
32:04
What are you doing for your own personal self development? And he was told, don't worry about getting better. Just go out and sell. I mean, and think about this. This person wants to do financial planning, wants to do what's in the client's best interest, but they were directly told, stop worrying about your own personal development and go out and just sell. And what does that tell me? This person was extremely smart, you know, has a lot of knowledge to help a client, you know, thinks about behavioral finance, which is a new growing trend. I'm helping you as a consumer. And another one run I heard just the other day, I'll share it with you this during the break. So I know of an individual going to Morgan Stanley and this individual was told that when they come over, they better be super dedicated and they better get the corporate cheese grater out because that's what they need to do here on behalf of the firm.
Speaker 4:
32:52
And I'm like, I don't even sure what all of that means. I know one thing is not good, tried to it a little more color. I don't want to get fined on the radio. So I uh, yeah, it's just imagine what they said, right? Yeah. Yeah. I mean think about that. If that's how they think. And again, by the way, I know it doesn't matter to me what business line you're in. We're in financial services, but you could be in anything. You could be in nursing, you can be in auto. You could be, you know, in data. You could be in construction. If you go look at really those best successful firms, Ron, aren't they all of them that truly think about the clients first and think about how to help people out. No doubt many of you have stayed in a hotel. Do you ever go back to a hotel that you had a horrible experience?
Speaker 4:
33:38
No, you immediately refused. I think about how many people get so frustrated over airline baggage fees. I refuse to fly Delta again. I refuse to fly United, American, whoever because of one bad experience. Yet with your money and your life and my understanding is we only get one shot at this life run. You're going to keep coming back and getting punched in the face by these firms hitting you with these egregious fees or not doing what's your best interest? Stop. Just stop now, mate. Make the change. You're going to feel so much better about it and what you're actually gonna learn is right now. Think about the first phone you ever had and how many numbers and digits did that alone. The numbers one through nine plus zero pound sign, the star sign and that was basically it, but you didn't know you had to make a leap of faith when you went to your first smart phone ever.
Speaker 4:
34:25
So you've got an iPhone and it probably costs you more, but actually costs you less than your time and your capabilities. What you're going to do, you need to get away from these firms that are still operating in the old world actually saw a financial services professional the other day, Ron with a blackberry and I was just surprised that just told me enough. If they haven't coming to come out of the blackberry world, what are they doing for you in terms of your planning, your investment, your taxes, your trust, all of those things. That'd be like having a Smith Corona typewriter.
Speaker 3:
34:54
It's so far removed. Yeah, we're talking about what's going on on Wall Street and you need, this is time to wake up. Everybody out there. If you're with one of these conflicted models who were with a brokerage firm, stand up, take a look and we can give you the answers and we'll inform you. There's no cost or obligation. Come in for a listening session. Get a second opinion. Let us look at what your overall risk is. What are you paying and total fees and expenses, and take a look at why we're a Barron's hall of fame team. We're good at what we do, but we're not just appealing just for us. We're appealing for you to make a change or at least take a really strong look and demand transparency and everything that you're doing. Give us a call. 888400900 85 (388) 849-8530 we have people standing by right now. Set a time to come in and have a listening session. Get a second opinion. Eight eight eight four nine 85 13 I'm Ron Carson with Paul West and you're listening to wealth from wisdom.
Speaker 2:
35:52
How could you make your money go further in retirement? Learn how next unwell from wisdom with Barron's hall of Fame Advisor Ron Carson. Is it possible you could pick fewer taxes in retirement and keep this money for yourself? You could learn right here and right now on wealth and wisdom with Barron's hall of Fame Advisor Ron Carson. Welcome back,
Speaker 3:
36:14
the welcome wisdom. I'm Ron Carson with my cohost Paul West and we're really just talking about all the scandals and the dirty and the ugly stuff going on on Wall Street, but more importantly, the fact that the poor consumer, 65% do not fully trust her financial adviser and Wells Fargo. They've set a new low and just how they're taking advantage of the consumer. And I want to stand up and say thank you to the financial advisors at Wells Fargo. The finally wrote to the Justice Department and to the SCC, it's been documented. Yahoo Finance, Wall Street Journal. There's, I mean you continue to read it and there's point after point after point where you're going, is this possible? I mean who on earth could think they would get away with this for any period of time and it absolutely is not right for the client. I mean they're talking about here we're advisors used to be ranked based on their investment performance, but now what do you think those rankings are based on Paul sales sales.
Speaker 3:
37:16
Yeah, they used to pay them a retention bonus for keeping clients, keeping them happy. Hey, it sounds to me like to an alignment of interest, but wells Fargo made a change and now what they said is all of that's been moved over to the sales grid, the sales grid, and this is where it's like no focus on trying to keep the clients of focuses on on sales. Another change was reflected in advisor schedule is portfolio management. Time became sales sign. One former advisor estimates that a normal week meant 20% of client meetings. They expected 80% of his time to be spent in sales. So a client is hiring. I can tell you what the people are paying attention here at Carson group, people were paying attention to your stuff. All the subject matter experts, they do zero in sales there. They're managing the money, doing the planning, all of the really critical stuff that you have a relationship manager that's responsible for development, but you want to have very specific and you need to have a well rounded team that does it all
Speaker 4:
38:22
well. You needed to separate any conflicts of interest. And one of the big conflicts of interests, Ron, by the way, is your time. So if your advisor, if they're your money manager there, you're a planner there, your research team, they're your tax expert. How can somebody do all of those things? It's just not possible. A team of people has to be there, uh, to be able to help. But I mean, I think you also have to look at, um, Ron, I heard, I saw an article in Ra is a, you know, an industry publication that we look at and I heard the sec went into large broker dealer, LPL recently and they're gone right after. Even independent advisors that are not putting clients in the right mutual funds because again, of fees and the right cost. And again, I can't believe people don't have tracking systems in place.
Speaker 4:
39:11
But Ron, when you're working with a one, two, three person office that isn't part of a large investment advisory firm that has the systems and the capabilities from a compliance perspective to protect you, they're going to make mistakes. It's just you cannot do everything. It's not possible. Uh, but what you can do is ask the right questions. And I think I look at the car industry is one of my favorite examples of this. Ron, I know I talked about carmax in a prior segment, but look what happened when Kelly blue book was first created. You'll at least gave a consumer something and now look Kelly blue book online. But now how many websites are there? I mean there's probably thousands that I'm even unaware of that you can actually go look, consumers are actually going and putting the price they actually paid for a vehicle and with what features.
Speaker 4:
40:02
So you're getting real data instead of approximate. So now you're not taking just Kelley blue book's value, but now you're getting what I call real supply demand data on what are people willing to pay for a car and what does that help? It makes people feel good. It's transparent. Just as you should understand what is a reasonable rate for me to pay. But you cannot do apples to apples. This is the biggest problem I see is if you say, hey my UBS guy or my wells Fargo person or whoever, I'm paying them one and a quarter percent, but all they're providing you as investment advice that they're getting comped on versus planning and trust and all these other things. You need to be careful and make sure you put them side by side so you can understand how all of that works. Cause I would bet again that what they're getting paid on is wherever they're spending all of their time versus they should be spending all their time on what's most important for you.
Speaker 3:
40:57
Absolutely. Yeah. Again, we taught, what would you call that here? Alignment of interest and alignment of interests. So Paul even gets worse as you're looking through these documents. So as they were moving clients into these high fee products, wells Fargo products company owned by Wells Fargo are majority owned. The models were dramatically underperforming. For example, 2016 the models on performing their benchmarks significantly according to internal documents by Yahoo finance to the large cap growth portfolio performance was up 0.03 this is before any fees were deducted. So it's just looking at how are they doing before all the fees were deducted
Speaker 4:
41:34
compared to the Russell growth up 7.08% over the same time period. This is before this was gross of fees. Before any of these high expenses were conducted, they were just sucking at what they were doing. There's no other way to say it. Um, and then if you looked at the, it gets worse. They go on to show how much these models, we're just lagging and advisors, we're getting complaints from clients. One former adviser said, we were taught to doublespeak. He said clients were upset. He says, I recalled again telling my manager I wanted to explain to him what was going on. And the manager said, we're not allowed to reveal, reveal the full details. Well, I mean, of course it's hot to double speak tot to doublespeak. And now I feel for some of these people, Ron, I mean, they're putting a terrible ethical dilemma because I mean, imagine if you're in their shoes and they're making x thousands of dollars a year and they're, they're living month by month, paycheck by paycheck to support their families.
Speaker 4:
42:36
They got kids, they're trying to put them through school and put money on the table. And I'm like, oh my gosh, I got to go find a new job, but I can't quit yet because I need to pay for my family. And that's a terrible position for those people to be in. So help them out if they're looking for a role, you know, they're doing the right thing if they're out looking because of ethical base. But here's another when and when your advisor leaves. Wells Fargo, do not hesitate for a moment because of they're doing it because of what's going on. Then you need to make sure they're going to a place where they're going to be a true fiduciary, but don't hesitate. Do not stay at least take a look at everybody that's out there. Look at everything that's around. So here's another example of industry we haven't talked about in today's show.
Speaker 4:
43:14
Ron is insurance-based firms. So they may be offer insurance and now they're in financial planning or they're in you know, advisory based business. But ask them the question, where do they get paid and how much do they get paid and do they get paid more to offering you an insurance based product that is one of their own products versus anything else. So think of mass mutual and Northwestern mutual is another great example of these run that they're probably going to try to sell you anything but ask them where do they get paid in which pays them the most? And then is this truly aligned with my interest? I think you're going to be surprised at the answer. And a lot of people don't think that way. So yeah, insurance is a great vehicle for many people, but it doesn't mean you're getting the best product or you're getting the best solution for yourself.
Speaker 4:
44:02
And you've got to be very conscientious of this. And by the way, that Brian, there's many times, well from wisdom, people have asked us to look at that and we've told them your stuff looks excellent. Yeah, I would say probably, you know, I don't know what percentage of it, but it's not zero, that's for sure. Right? Plenty that people aren't a great spot. I want to help them feel comfortable that they've made the right decisions in their life and not second guess it. And here, this was the last point on wells Fargo. They must think that people here, this came from the top. They were questioned about the fact all these financial advisors, we're wells Fargo said
Speaker 3:
44:32
no, those were retirees. But all you gotta do is go check broker check. And on Wall Street actually did and they didn't retire. They love for competitors. So even if the top, they must think we're all idiots that we don't have the, you know, no one's going to take a look. You know, you can say one thing. It's easy to go check it. You know, today is the first day of the rest of her life. Stand up for ourselves. Do something about it. Get a second opinion. Have a listening session here at the Carson Group. Call eight eight eight four nine 85 13 that's eight eight eight four nine 85 13 be an advocate for yourself and be involved. Eight eight eight four nine 85 13 I'm Ron Carson with Paul West and you're listening to wealth and wisdom. Okay.
Speaker 2:
45:16
Risks, social security, income taxes, estate planning. Every week we talk about how to make your money go further in retirement right here on wealth from wisdom with Barron's hall of Fame Advisor, Ron Carson.
Speaker 1:
45:29
Oh, okay. And here's the legal Mumbo jumbo. The opinions voiced and wealth and wisdom with Rod Carson or for general information only and are not intended to provide specific advice or recommendations for any individual to determine what is appropriate for you. Consult a qualified professional. All indices are unmanaged. I may not be invested into directly investing involves risk, including possible loss of principle. No strategy assure success or protects from loss. Past performance is no guarantee of future results. Advisory Services offered through Cwm LLC, an SEC registered investment advisor.