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Riskalyze debuts website featuring 'worst' wirehouse portfolios to shock and attract clients

Horror stories abound -- like the 82-year-old widow who has 15% of her holdings in Apple stock and 9% in Facebook

Author Lisa Shidler February 15, 2013 at 6:14 AM
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Aaron Klein: I'm hoping that our entire industry will rise up and throw the idea of selling IPOs and derivatives to grandmothers under the bus.

Elmer Rich III

Elmer Rich III

February 15, 2013 — 5:32 PM

One of the most successful pro investors we have known used to short the Morgan Stanley tech stock recommendations. Made a lot of money. “Buy low, sell high”

Few other points – it is not risk but uncertainty. Risk is when the probability is known. Selling uncertainty unknown probability, as “risk” is a chronic mistake in the business. In fact, most people are not risk averse, when the probabilities are known, but uncertainty averse. Current portfolio management theory pretends the probabilities are known, they are not.

Look, criticizing the competitors and scare tactics are standard (old fashioned, really) marketing and sales tactics — but the fact is that the state of portfolio management theory and practice is in it’s infancy. Let’s not be fooled by tech. Who can really do better than anyone else? Research says no one.

There is also the classic smart client question: “If your such a great investor — why do you need client money?”

Stephen Winks

Stephen Winks

February 15, 2013 — 7:45 PM

Sorry Elmer commented—nothing of consequence, greatly reduces the level of discussion.

SCW
Stephen Winks

Stephen Winks

February 15, 2013 — 7:58 PM

The brokerage industry is product focused, not client focused by virtue of brokers not being accountable nor having on going responsibilities for their recommendations there is no mechanism in place to determine whether value is added or not. Clearly, becuase of their product centicity, they are not client focused, thus incapable of fiduciary duty.

I recently spoke with a top Merrill Broker, $3 million in gross, who is interested in regulatory reform. His observation was very few brokers can compete on their portfolio construction accumen.

Thus RiskAlyse is an important catalyst for innovation and fiduciary standing as very few broker portfolios look good when evaluated. This is not the broker’s fault. It is the industry’s reliance on very expensive packaged products which pays for unnecessary overhead, and the political inexpedenciency of middle management advancing support of fiduciary standing in violation of internal compliance protocol which maintains brokers do not render advice nor have fiduciary duties so fiduciary liability can be mitigated. The unfortunate consequence is that brokers are not supported in rendering advice of fulfilling their fiduciary duties which translates into very expensive underperformance made clear by RiskAlyse.

Brilliant free market solution that will drive massive assets from a brokerage format to an RIA foremat.

SCW

Aaron Klein

Aaron Klein

February 18, 2013 — 10:56 PM

Stephen,

Just a quick note to say thank you for your comment. We’re excited about supporting RIAs in their efforts to bring transparency and better focus on client needs. It’s the right thing for investors.

Best regards,

Aaron
CEO at Riskalyze
aklein@riskalyze.com

Stephen Winks

Stephen Winks

February 19, 2013 — 12:10 AM

Aaron,

Thank you for your kind comment. I encourage you to RiskAnalize further and to be more aggressive.

Nothing of consequence ever happens without passion. Redouble your efforts, you are doing important work which will materially impact the industry.

You need to align with a top account aggregiagation vendor,(it will take some research to select the right tactical partner) so that between you, you collectively could create an expert authenticated (to statute, case ;law, regulatory opinion letters, best practices) asset/liuability study which is required by statute, so it is possible for recommendations to be made in the context of all a client’s holdings which would establish an understanding of whether a frecommendation actually increased overall portfolio returns, reduced risk or enhanced the tax efficiency, liquidity or cost structure of the client’s holdings as a whole essential for client success..

Without an asset/liability study capability—it is literally not possible for a broker to know whether their recommendations added value or not. The asset/liability study is essential to the broker to be accountable for their recommendations and is required by statute to fulfill one’s fiduciary duties in the best interest of the investing public.

It is malpractice that the brokerage industry does not have nor require such capability for every recommendation, going far beyond suitability to protect the best interest of the investing public, so the broker can fulfill their fiduciary duty.

SCW

Elmer Rich III

Elmer Rich III

February 19, 2013 — 12:52 AM

Globally trashing competitors with made up portfolios and scenarios is in the “right thing for investors”!? C’mon. It’s just a sales tactic and a pretty lowbrow one.

Also, it’s not “risk” it’s uncertainty. Confusing the two does not help investors but is another uninformed sales tactic.

BTW, a basic sales/marketing tenet is never refer to your competition. Why call attention to them?

Stephen Winks

Stephen Winks

February 19, 2013 — 1:42 AM

Elmer,

Until you have something substantive to say, there is certainly no reason for anyone to take your vacuuous comments seriously.

SCW

Elmer Rich III

Elmer Rich III

February 19, 2013 — 4:16 PM

Scare tactics are unprofessional and, in fact, recent data show that hybrid RIAs – combining both commission and fee business are growing fastest. Clients are voting with theri feet and like that model – more than a fee-only model.

Aaron Klein

Aaron Klein

February 19, 2013 — 4:25 PM

Stephen,

Thanks again and I appreciate the advice. If we can be helpful to you or your firm, don’t hesitate to let me know.

We work with advisors of all stripes – RIAs, Registered Reps, hybrids, wirehouse advisors – and the only people who have been offended by WorstWirehousePortfolios.com have been the handful of old-line brokers who want to defend selling IPO stocks, derivatives and bloated-fee mutual funds to grandmothers.

Simple, straightforward analysis of the risk in a prospect’s current portfolio is the #1 sales tool that our advisors are using to win new clients, and we’re perfectly happy to equip advisors to shine the bright light of transparency into investing’s back alleys…regardless of who that may offend.

Best,
Aaron

Stephen Winks

Stephen Winks

February 19, 2013 — 7:18 PM

Elmer,

Professional standing is important. Commission and fee compensation is growing rapidly because commission brokers are trying to evolve to unconflicted fee based counsel without much help from their supporting broker/dealers.

It is no mystery that commission sales are inconsistent with fiduciary standing and have been outlawed as such in other parts of the world which actually supports the best interest of the investing public.

Brokerage interest will lose this arguement here in the US as well. Consumers will demand it and enterprising advisors will provide unconflicted advice.

Thus your supposition that commission and fee compensation are growing quickly is to discount the value of integredity, fiduciary standing and the ethical conduct of commercial enterprise ? Why am I not surprised?

SCW

Todd

Todd

June 21, 2017 — 8:15 PM
Bet that lady wishes she would have kept her allocation in FB and AAPL!!!
Elmer Rich III

Elmer Rich III

June 21, 2017 — 8:31 PM
It is unprofessional to make suppositions and I make none. What does the public data say? Moral judgements are personal opinions and subject to queries about self-interest. Without data on what "consumers demand" we are trading in personal opinions, some more. If one side of this debate is less conflicted then another let's have some evidence, shall we? ER3
Stephen Winks

Stephen Winks

June 22, 2017 — 4:51 PM
Elmer, The CFP Standards Board just required all CFPs to fulfill their fiduciary duties, as it is no longer acceptable to just aspire to act in a fiduciary capacity, you must actually in fact comply. Treating trade execution as a cost center to be managed in the client's best interests is a tenant of fiduciary duty, as opposed to not treating trade execution as a b/d profit center. Your fixation on commission sales is inconsistent with the professional standing of the broker if they are rendering advice. It only makes sense if the broker is not rendering advice which of course makes them vulnerable to those who do. Can you be serious? This is not even worth discussing. SCW
Elmer Rich

Elmer Rich

June 23, 2017 — 3:23 PM
"Without data, you are just promoting your personal opinion." Usually, people promote opinions that make them money. That is called self-dealing. Self-dealing is malpractice in the professions. It should be the same for social media commentators. lol
Stephen Winks

Stephen Winks

June 23, 2017 — 5:51 PM
Elmer, When you are given data, you wouldn't recognize it and the demand more data. There is a word for that, care to guess? SCW

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Mentioned in this article:

LPL Financial
RIA-Friendly Broker-Dealer, RIA Welcoming Breakaways, Advisory Firm
Top Executive: Dan Arnold

Finetooth Consulting
Consulting Firm
Top Executive: Ryan Shanks

Riskalyze
Tech: Other
Top Executive: Aaron Klein

FA Match
Consulting Firm, Specialized Breakaway Service, Recruiter
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