Provocative Musings

Rocket science requires very complex math. Normal investing doesnít.

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 donít 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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