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How indifferent ethical conduct by the investment consulting industry is giving investors a Big Short

Financial advisors are good guys -- mostly -- but the industry is halfhearted when it comes to alerting clients to alternatives risk and tax ramifications

Author Guest Columnist Rex Macey March 7, 2016 at 5:37 PM
2 Comments
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Rex Macey: I’d like agreements to have a page of normal-size print in red outlining the risks.

RIA Compliance


FAA

FAA

March 9, 2016 — 3:18 PM

All industries have short comings and 'room for improvement’ but to suggest broad unethical behavior doesn’t ring clearly for me. Investment consultants – the Mercer’s, Towers Watson, Cambridge, Callan, Wilshire et al shouldn’t be coupled in with advisors- totally different breed. Clients of investment consultants like those mentioned have internal staffs, information, access etc.- tougher for an investment consultant to slip one by the ethical goalie. That is not the case with many advisors- their clients simply don’t have the resources/information so…yeah it is open season.

Some of your comments are incorrect as it relates to the investment consulting community- most, if not all, do maintain a track record of recommended managers. Statistics are tricky as you mentioned- but the investment consulting industry regularly and as a matter of 'process’ look under the hood of all returns- that’s been in place for years. Perhaps the average advisor does not but those charged with fiduciary duty absolutely do. The active/passive argument has been in play forever- there is not a right or wrong answer or strategy- but to suggest that is somehow hidden from Calpers by their consultants is a odd. Again, advisors may try to pull that on the Little of Lady from Scarsdale.

Stephen Winks

Stephen Winks

March 12, 2016 — 6:18 PM

Rex understands the advisor space very well. Starting at Kidder with Bob Padgette, who with Rex founded Mobius (pioneering SMA data base), and now at one of the industry’s leading top private Wealth Banks and trust companies serving higher end clients. Thus his perspective is impeccable. We have a lot to learn as most advisors only know advice from a brokerage perspective which does not acknowledge or support fiduciary duty. Rex is very constructive in pointing out areas in which broker/dealers might address to advance fiduciary duty and establish the professional standing of its brokers when rendering advice. It will take a while for brokerage to adapt but none-the-less it is important to reference the work required, largely ignored and dismissed, that must be done to achieve professional standing in advisory services. There are several groups that are amassing war chests to take advantage of large firms which will not be able to successfully adapt to a high standard of advisory services required by statute. Thus Rex’s assessment is particularly timely and welcomed by all who are captured within a high cost, low value added brokerage format opposed to fiduciary duty in the client’s best interest..
SCW


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Investment & Wealth Institute
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