Because what we get from doing the right thing is priceless.
WE will never allow our objectivity to be compromised by taking kick-backs, sales commissions, gifts or promotional incentives.
WE will never be handcuffed to an employer's menu of financial products or recommend things that make a profit for the house.
WE will never allow someone at our firm to call himself an "Advisor" just because he passed the 140 question multiple-choice test to get a license.
Other countries restrict the use of the title "Financial Advisor"; if they are unqualified by education and experience or receive any sales-related compensation, they must call themselves something besides "Advisor" so the conflict of interest is clear and obvious to the consumer - not buried in the fine print.
Why don't we do that in our country? Because self-regulated Wall Street spends gazillions of dollars lobbying to prevent it. This isn't the first time (go ahead and Google "the Merrill Lynch Rule") and it probably won't be the last.
Wall Street is one of the most horrendously conflicted places on Earth, and the companies that profit from it deploy insurmountable resources to intentionally cloud the facts.
Here's a quick, true story that may help explain:
It's 1980-something; I’m standing in a cruise ship Casino among a crowd of passengers who appear hypnotized by a large wheel, spinning on the Casino wall. The wheel contains the numbers 1 through 100, and the objective is to correctly pick which number will be at the top of the wheel once it stops.
An attendant in a tuxedo spins the wheel while a few gamblers place their bets. But the majority of the crowd just stands there, gazing at the wheel, each holding a little yellow pencil and a white note card that says "Number Tracker" across the top in bright red letters.
Each time the wheel stops, Tuxedo yells-out the winning number, and the spectators bow their heads to scribble something on their Number Tracker cards. My curiosity grows, and I finally have to ask why:
“Excuse me, Sir,” I said to the elderly man standing next to me, “May I ask what everyone’s doing?” He reluctantly revealed his Number Tracker card and said, “We're tracking the numbers."
As I studied his card, I saw that he had been marking an X across the numbers that had won in recent spins. “Number 34 just came up on the last spin," he said, "so I know that I should not bet on it right now.”
“Why not?” I asked.
He raised his eyebrows and glared at me over his reading glasses. “Odds are against it", he said. "How likely is it that 34 will come up again on the very next spin?”
I quickly answered, “One in a hundred”.
He looked to the ceiling for patience, and calmed himself with a deep breath. "Now look," he said, "since number 34 just won, the chances of it winning again anytime soon are pretty remote - so I crossed it off my card. Understand?"
"Actually," I replied, "every time the wheel spins, each number has a one-in-a-hundred chance of winning - it doesn't matter which number won last time."
The man threw his hands in the air and sarcastically barked, “Oh, I see; you’ve got it all figured out, and the rest of us are just a bunch of dummies, huh?”
He returned to his task as I stood there with one of those "Are you serious?" looks on my face.
And then it suddenly occurred to me: Who gave all these people the little yellow pencils and the "Number Tracker" cards?
That’s right - the casino did. They know that humans tend to validate risk through irrational behaviors, so the house promotes it. They capitalize on it. And they even distribute the tools for people to do it with.
Is this illegal? No. But that doesn't make it right!
The same shameless profiteering has become a cornerstone of the Wall Street culture, and the once respected brokerage firm has become a pyramid-schemed product distributor at the expense of well-intended advisors and innocent investors.
So even when it seems like everybody else is doing it too, be smarter. Even when your portfolio is going up and everything seems fine, read the fine print. Ask tough questions. And seek objective guidance from an independent expert with no dog in the fight.
Why am I still in this business if I so despise its traditional culture?
Because this is where we can make a BIG difference.
No - it's not okay to promote consumer confusion and then profit from their lack of understanding.
That's NOT doing the right thing, and our firm won't let it happen to our clients.
MY BEST ADVICE FOR INDUSTRY PROFESSIONALS:
I believe most of you regard yourselves as intelligent, honest and ethical. So just answer this one question:
Are you aware there is a very strong inverse correlation between what is best for your clients and what your employer pays YOU the most money to promote?
Many of you are unaware rookies, blissfully drinking the company Kool-Aid. I was too at one point, so my advice for you is to take a peek behind the curtain and see what OZ is grinding into the sausage that you sell to your clients. Then, take an independent look outside to see if there's a healthier choice. And when you find that there is - ask your boss why FINRA's "trade away" rule prohibits you from getting it for your clients? Why are you held to a "fiduciary" standard but literally prohibited from doing what's actually best for your clients?
Many of you are semi-conscious about it; aware but hopelessly addicted to the fancy title, company logo and hefty paycheck. I was too at one point, so my advice for you is to grow up and recognize, at the end of your career, that the most positive difference in your life will come from making the most positive difference that you can in the lives of your clients. Eliminate anything and everything that prevents you from being completely objective and truly independent, and take that leap of faith toward a Fee-Only career. If you really want to but don't know how to get started - call me.
And there's a good handful of you who are fully aware, just don't care, and surround yourselves with open cookie jars yet claim to never have your hands in one. I've got nothing to say to you.
Take baby steps. Begin to continuously ask yourself, "what would I do if it was MY money?". And then listen to your own words of wisdom.
Because, when it's all said and done, true wealth has nothing to do with money!
Michael T. Koenig
FirsTrust founder & CEO
Daytona Beach Atlanta Orlando Tampa Sarasota West Palm Boca Raton