Provocative Musings

Rocket science requires very complex math. Normal investing doesn?t.

If we can send a man to the moon, surely we can determine which share class to buy, the fair level for a wrap fee, or if a recruitment offer makes economic sense. Why, then, do we constantly make so many sub-optimal financial decisions?

Broker Village addresses the issues below. If we can help your firm in these areas, call us.

Compliance & Product Development Issues

?      Clean and T-shares can cost FAR more than traditional shares if investor benefits like LOI, ROA, and free exchanges are lost

?      Investors benefit most by reductions in loads and CDSCs, not management fees

?      B/Ds that view trades with the same optics as regulators get in less trouble

?      Conflicts of interest should be measured over time, not at the point of sale

?      Investors don?t know that wrap accounts often cost far more than brokerage accounts

?      If regulators focused on account value over cost reduction, fines would be higher

?      If B/Ds focused on account value over cost reduction, fines would be lower

?      Fixation upon funds 12b-1 fees leads to wrong conclusions and unsuitable policy

?      12b-1 fees help to increase asset retention and lower unnecessary turnover

?      Load share 12b-1s are their 5th biggest cost. So, why do regulators fixate over them?

?      Fines would be rare if firms used total cost of ownership, over time, for comparisons

?      Promoting tax deductibility of 529 contributions may cause investors to buy the wrong 529

?      More C-shares should flip like B-shares to be fair to investors

?      B- and C-shares often create more account value than A-shares for trades under $50,000 

?      Reverse churning of fund shares easily can be identified and stopped

?      Most on-line calculators are inaccurate, particularly share class calculators 

?      Many fund prospectuses have errors in the expense and performance examples

Advisor Business Issues

?      Working the back of a book leads to a huge increase in GDC and practice value

?      Advisors who focus on account accretion over cost reduction set themselves apart

?      Selling funds with low expenses actually pays the advisor and B/D more

?      Sales assistants can pay for themselves many times over within a year

?      Independent advisors sell their assets for far too little

?      Wirehouse advisors could negotiate far better offers when they move

?      Wirehouse branch managers could make much more compelling offers to recruits

?      Those 100% payouts are a lie; it's 100% of 80% of a smaller trade

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