Everyone in business has a conflict of interest

It was heartwarming to read the Other Voices column by Michael Chamberlain, “Let’s call a spade a spade and a salesperson a salesperson,” in the Oct. 5 issue.

Reading about how consumers should be warned about people who have a conflict of interest really struck a chord with me.

I am one of those shameful people who operates as a registered investment adviser and is paid on the basis of commissions. I am aware that I have a conflict of interest whenever I deal with the public.

What I was unaware of was that Mr. Chamberlain didn’t.

My feeling was always that I had a responsibility to recommend whatever would give the client the best opportunity to further their goals and let the compensation flow in whatever way it came.

That is why what is recommended varies from person to person and situation to situation.

The thing that I enjoy about the model I use is that it doesn’t limit what I recommend. Whatever works the best can be employed.

As I look at this business and any business, I feel that everyone has a conflict of interest.

Mr. Chamberlain noted the difference between the physician, who is a professional and in Mr. Chamberlain’s mind has no conflict of interest, and the pharmacist, who is a lowly salesperson pushing his drugs to load up on money.

I have to disagree with Mr. Chamberlain.

Physicians, who order a battery of tests at their facilities, might do so in order to reduce malpractice liability and to derive revenue from the testing itself.

In one battery of tests, the physician may well profit more than the lowly pharmacist does in a month.

I like to assume that most of the time, physicians are acting in the best interest of their patients, in spite of the large conflict of interest.

Certified public accountants who recommend to their clients that they have an audited statement are going to charge the client for that statement and have a conflict of interest.

I am assuming the CPA will recommend extensive, expensive work to those who truly require it.

The same goes for dentists, hairstylists and Mr. Chamberlain.

Although I take him at his word that he is a far more honorable person than the “great unwashed” who have a more diverse way of being compensated, he still has a conflict of interest.

If Mr. Chamberlain is charging investment management fees, I assume he is keeping them and not donating them to charity.

If he is charging an hourly fee, I assume he is keeping that as well.

It is quite possible to recommend and complete work that is not really needed, to charge a flat fee for a plan for a person in a simple situation who doesn’t need this type of service, and to keep money in managed accounts that could be better employed elsewhere, in order to generate fees.

I am sure that Mr. Chamberlain wouldn’t do any of these things, but his insinuation that I or anyone else in my business model would is exceedingly self-serving.

As far as sales goes, if he wasn’t able to sell people on the idea of using his services, he would be out of business.

Every businessperson is a salesperson.

It seems to me that making a blanket statement that his competitors work in a manner that is “not in the clients’ best interest” may be a great marketing/sales tool that Mr. Chamberlain uses, but it isn’t truthful.

Perhaps he could do a better job for his clients if he were aware that he has a conflict of interest that he needs to mind.

Richard Frontera
President
NPA Financial Inc.
Clifton Park, N.Y.

Finra doesn’t need such a large “slush fund’

Imagine this scenario: Your firm’s net capital falls below what you would like.

You decide to boost it by raising the fees that you charge your clients.

Question: How long before the Financial Industry Regulatory Authority Inc. busts you for stealing from clients?

That is exactly what Finra is do-ing by raising your fees in response to its slush fund’s losing 27% last year.

The slush fund stood at $2 billion last year, which is why Securities and Exchange Commission Chairman Mary Schapiro received five times what the president of the United States earned (she received a $2 million salary as chief executive of Finra).

Has anyone ever explained why Finra needs such a large reserve (slush fund)?

Hans Beerbaum
President
Beerbaum & Beerbaum Financial and Insurance Services Inc.
Petaluma, Calif.

Name change to Finra cost firms a bundle

I read the editorial “Is Schapiro the right person to reform the SEC?” which appeared in the Oct. 12 issue.

During her reign as head of NASD, she changed the name to the Financial Industry Regulatory Authority Inc.

That may not seem like an important move, but it made every sign, every business card, every envelope, every letterhead, every memo pad, every sign and everything else that had a brokerage’s name on it obsolete.

This was very expensive for my independent LPL Financial office, and there was no real reason for it.

Somewhere in one of Mary Schapiro’s meetings, someone said, “Let’s change our name to better reflect who we are today,” and the committee said, “Yeah,” without regard to the cost.

Of course, bureaucrats never do think about that.

Jeff Neelon
Branch manager
Lumberton, N.C.
LPL Financial

Treatment of Waterstone may cost LPL many reps

As a former adviser at Waterstone Financial Group, I am surprised at the lack of coverage and comment on LPL Financial’s poor handling of integrating Waterstone’s operations.

I would be shocked if LPL does not lose at least 50% of the Waterstone representatives, simply because of the cavalier and duplicitous manner in which the firm handled the whole matter.

A lot of good people sacrificed themselves for a very fine organization only to be treated like pawns on a chessboard by LPL management.

In the end, LPL will go public, and a lot of those responsible for the poor treatment given the Waterstone people will make a lot of money.

It is too bad in our business that so many confuse their net worth with their self-worth.

The powers that be at LPL couldn’t hold a candle to even the receptionist at Waterstone.

Kevin Newman
Registered representative
Ausdale Financial
OakBrook, Ill.

Buy-and-re-balance strategy still pays off

I read the story “The days of “buy-and-hold’ have gone and went,” which appeared in the Oct. 12 issue.

It saddens me to hear that so many financial advisers are switching to a more tactical approach.

As I am sure you have noticed, there has been plenty of media attention focused on advisers’ saying that modern portfolio theory is dead and that this is a new age of investing.

As a relatively young certified financial planner, I feel like I have heard all that many times before.

Markets go in cycles; bubbles burst; there is no free lunch.

Buy-and-re-balance will continue to be a strategy that pays dividends for advisers.

Steven Elwell
Financial planner
Schroeder Braxton & Vogt Financial Advisors
Amherst, N.Y.

Big B-Ds are trying to squeez

As I read the Newsmakers interview in the Oct. 12 issue with Sallie Krawcheck, president of Bank of America Corp.’s global wealth and investment management unit, all I could think is that Merrill Lynch & Co. Inc. is owned by BofA, which is owned by the government.

My tax dollars are being spent on a $20 million advertising campaign this quarter, and she is trying to discredit the independent-broker-dealer channel.

I am a registered representative of an independent broker-dealer. I am proud of the abundance of choices for my clients.

Big government is never the answer.

Big broker-dealers are attempting to squeeze out the independent broker-dealer.

This will mean less competition in the investment arena and fewer choices for the consumer.

Margaret Remlinger
Owner
Remlinger Financial Services
Plainfield, Ill.

Related Topics: Letters To The Editor