Investor Watchdog – Finance Education

Morgan Stanley sues ex Brokers that look to serve thier clients in an independent fashion

By: Daniel Chen | March 5, 2010 | Investor Information

I found this artcle to be very interesting. In order for Morgan Stanley to continue perpetuating thier practice of serving clients while maintainng thier army of brokers they have taken the following action. Even though brokers are looking to serve thier clients in a different fashion, MS will take action to not lose the revenue at all cost. Read this and enjoy.
“>http://www.fa-mag.com/fa-news/5234-morgan-stanley-sends-message-with-broker-suit.html

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How to Choose the Right Adviser?

By: Matthew Arndt, CFA, CPA, CFP | February 22, 2010 | Financial Advisors, How to Select Advisors

When it comes to their money investors must thoroughly investigate the adviser’s credentials; whether the adviser is held to a fiduciary standard (not just a suitability standard); and whether there are any material conflicts of interest that would exist with the investor/adviser relationship.

There are many investment credentials out there and sorting through them can be overwhelming. The letters after an adviser’s name are an important gauge of how much training he has actually received. Some certifications require very little study or work experience and can be attained rather easily while other designations require far more rigorous study and examinations to earn. It is important that investors get to know the letters behind the name of the person they are about to hire because the holders of more prestigious designations have demonstrated a commitment to become better at their craft and have shown a strong desire to maintain a higher level of integrity.

Just as important to understand is that not all investment professionals are held to a fiduciary standard. Be very wary of a broker who calls himself an investment adviser as a broker is generally not held to a fiduciary obligation (only a suitability standard which is extremely subjective). A fiduciary standard is a legal duty that requires advisers to put a client’s interests ahead of their own at all times and to fully disclose their conflicts of interest.

A conflict of interest exists when an adviser’s interest competes with his duty to his clients. Such a conflict is material when it has the potential to dramatically affect the result. The fact that a broker receives commissions if a client implements a particular recommendation is a material conflict of interest that should be weighed considerably before an investor does business with any broker.

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Advisor Admits Fraud-Employed at a Trusted Wall Street Firm!!

By: Daniel Chen | February 19, 2010 | Bad Financial Advice, Report Fraud

This type of action continues to show all of us that the responsibility of qualifying a competent and trusted Advisor to work with still resides with the individual. The investor needs to educate themselves on how to decide on what type of advisor to work with. Investors need to ask questions, review certifications, review investment philosphies and more. Investors need to advocate for themselves today more then ever as demonstrated in this article. These type of criminals believe that if you work for a big brand name that is supposedly trusted, then no one will ever ask questions that may uncover thier fraudulant activities.
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Enjoy!!!

http://www.app.com/article/20100218/NEWS/100218072/1401/Former-financial-adviser-admits-scamming-investors-out-of-more-than-685-000

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Brokers versus Advisers

By: Matthew Arndt, CFA, CPA, CFP | February 16, 2010 | How to Select Advisors, The Regulators

Many investors are confused about the term investment advice and the different types of professionals who can provide it. Most investors do not understand the differences between investment adviser representatives or brokers calling themselves financial advisers; and the standard of care they think they are receiving from each.

Fee only investment advisers are legally obligated to act in the best interests of their client (i.e. act as a fiduciary). In contrast, brokers who call themselves financial advisers facilitate securities purchases and sales for their clients, usually for a commission, and are primarily governed by FINRA, which (and this is key) requires that investment recommendations they make to their clients be suitable for that particular client. In broker/client relationship, filled with all sorts of conflicts of interests, suitability is an extremely blurry standard at best.

A report by The RAND Institute for Civil Justice in 2008 found that 63% of investors believe registered representatives are required to act in the best interests of their client (they aren’t), and 70% believe that registered representatives must disclose any conflicts of interest (generally, they don’t)… [TD Ameritrade White Paper].

Due to the influence of special interest, Congress has not taken the initiative to clear up the confusion. Unfortunately for investors, confusing the two can have entirely unintended consequences. A clear line needs to be drawn between them so investors can make more informed decisions. There needs to be a clear distinction between who is a fiduciary and who is a salesperson. Anything less is irresponsible and unacceptable.

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Investors Have Short-Term Memories

By: Jack Waymire | February 9, 2010 | Conflicts of Interest, Wall Street Ethics, Who Can I Trust?

Wall Street is counting on the short-term memories of millions of investors who need their services so it can return to business as usual.

Two times in the past decade Wall Street greed and incompetence created trillions of dollars of losses for investors. You might think investors would be fed up and pull their assets from these institutions. There are three reasons why millions of investors stay with Wall Street firms.

First, they still need Wall Street’s types of services. And, unfortunately, investors don’t know where else to go to get the planning and investment services they need.

Second, Wall Street uses advertising and other marketing tactics to tell investors what they want to hear – we are competent and trustworthy. Unfortunately, people believe these marketing messages and forget the billions of dollars of fines that Wall Street companies paid for cheating investors.

Third, Wall Street employs or licenses hundreds of thousands of personable financial advisors who commiserate with investors then sell them Wall Street’s latest products.

There is a solution. Hire an independent Registered Investment Advisor who is paid fees to help you achieve your financial goals. They do not have the conflicts of interest that afflict Wall Street companies. For example, they don’t have shareholders, Boards of Directors, and senior executives seeking $50 million bonuses. Independent professionals can focus on helping you achieve your financial goals.

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Globalization at Its Worst

By: Matthew Arndt, CFA, CPA, CFP | February 5, 2010 | The Regulators, Wall Street Ethics

Just when you thought the ill stench wafting from Wall Street couldn’t get any worse. A recent U.S. report details how large American banks like Citigroup, Bank of America, and JP Morgan Chase facilitated the laundering of hundreds of millions of dollars on behalf of corrupt foreign officials who were subjects of criminal investigations into charges of money laundering, bribery and extortion, and who publicly associated with people like Libyan leader Col. Muammar el-Qaddafi. Supported by bank statements and internal e-mail messages, the Senate report details how the large banks ignored controls intended to prevent money laundering.

The report details how, between 2004 through 2008, high-risk clients from corrupt countries used American banks, real estate agents and lobbyists “to conceal, protect and utilize their ill-gotten gains” to purchase such items as: several C-130 Hercules military transport planes (with United States government permission), Hummer H2 armored vehicles, Ferraris, a $38.5 million Gulfstream G-5 jet, a $30 million home in Malibu, Calif., and invites to the 2007 “Kandy Halloween Bash” at the Playboy Mansion. It also describes how former President Omar Bongo of Gabon, carried a suitcase containing $1 million in shrink-wrapped bills into New York for his daughter to buy a Manhattan apartment.

Obviously, these banks used absolutely no discretion when deciding who they would do business with as long as the money kept rolling in. Could any of this money have supported state-sponsored terrorism? Where were the large banks planning on drawing the line? And our tax dollars are supporting these shenanigans?

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