Tuesday, September 15, 2009

Is a Merrill Lynch Broker Targeting You???

Merrill Lynch has been aggressively recruiting brokers from other firms with huge bonus incentives. According to an article published in Financial Planning, new Merrill recruits can earn 140% of their trailing 12 month production in addition to annual bonuses as high as 60% of their annual production!

As you can imagine, Merrill brokers (as well as others) have a tremendous incentives to increase their assets under management. The use of aggressive bonus policies has given Federal regulators cause for concern. SEC Chief Warns Broker Firms of Aggressive Recruiting Tactics .


It goes without saying that investors need to be more cautious than ever regarding their financial decisions. If the Bernie Madoff case doesn't show you how easy it is to get duped, then your are setting yourself up for disaster. Needless to say, in tough economic times, more and more people are out to get your money. Who's Looking Out For You? Certainly you can't expect your salesperson to be looking out for you. He or she only has an obligation to offer you products that are "suitable" for you. It doesn't matter that the products are loaded with front-end or back-end fees, or that the salesperson is making a huge commission off of the sale. It's all legal!!

Is the Government Looking Out For You?

This thought might even cause you to chuckle a little. Favorability ratings for the government continue to drop to new lows while the politicians live the high life at our expense. Taxes keep going up, government perks keep going up and government effectiveness falls. If you have been following the analysis of the SEC's action in the Bernie Madoff case, you should be aware that the government IS NOT looking out for you. And even if they were, laws currently in place do not seem to be very effective.

I was once a regulator and remember speaking with a person who was grossly violating the law. I talked to him and he clearly and logically explained his actions to me and why he would not stop doing it. He told me that he was making millions of dollars a day doing what he was doing and what would we do about it? The maximum penalty would be a $10,000 fine! He said that the fine was merely the cost of doing business.


The financial world is getting way too complex and product salespeople often just sell you the sizzle. You generally don't ever find out that you are getting ripped off until you talk with another broker who is trying to get your business. Only then do you learn of the high fees and commissions you paid for some product that really wasn't in your best interest. And then what does this new salesperson do? I'll leave it to your imagination.

Each week I meet with people who not only make costly decisions about their money but it doesn't stop there. Mistakes are found in nearly every aspect of their financial life: taxes, insurance, estate planning and so forth. How sad it is that so many aren't willing to spend the money to hire competent advisers who are free of conflicts of interest. In the end, they lose so much more than the fee they might pay for such service. Usually only after it is too late do they seek advice.


When choosing an adviser, be weary of someone who also sells products or manages money. If they call themselves financial planners and are also engaged in selling products or gathering assets under management, their goal is but one thing - to sell you products or get your assets under management. How can you expect them to provide you with the best advice possible? You can't.

Check Their ADVs or U4s

Every Investment Adviser or Investment Adviser Representative is required to fill out certain government forms in order to be registered. It is your right to review these documents and you should. Not only does it disclose all conflicts of interest (other ways the adviser makes money), it also discloses all unethical actions, complaints and undesirable actions that the adviser had been involved in. It is your right to know and your obligation to review this information. If you hire an adviser to provide you with comprehensive planning, make sure that this person is not trying to replace all of your other advisers (investment broker, insurance agent, etc.). Instead, direct your adviser to research all of your current advisers to be sure that they are living up to the standards that you expect.

For more information on how to protect yourself against high fees, taxes, and fraudulent financial practices, contact me at gary@assetdesigncenter.com.

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