Financial Adviser or Huckster?

Mar 27, 2013 by

Dollar sign on Wall Street

On Wall Street, money rules.

Did you catch the March 02 article in the New York Times titled “Selling the Home Brand: A Look Inside an Elite JPMorgan Unit”? The subject unit served clients typically with at least $500,000 in investments; even if you don’t meet this qualification, if you’re using or contemplating using a financial adviser, I think the article is well worth reading.

“You are not a money manager; you are an asset gatherer.”

The above quote, related to the Times by former JPMorgan financial adviser Brad Scott, is from a JPMorgan executive on a conference call instructing advisers-in-training on their proper role in the firm. “Asset gatherer” means collector of customers’ cash. In short, JPMorgan’s financial advisers weren’t trained in financial advice or money management, but rather in highly aggressive and thoroughly scripted sales tactics. Mr. Scott also says “We were not able to do the right things for our clients.”

Financial Advisers as Pitch Men and Women

Here are a few gems from the article:

Everything is scripted for the brokers in an elite group at JPMorgan Chase: the sales pitches; the personal voice mail message; even the preferred desk candy, Glitterati Fruit & Berry.

In a three-inch-thick training manual, the bank, the nation’s largest, details how to recruit clients, pitch products and, ultimately, close the deal — or, as JPMorgan puts it, “get to Yes!”

I’ve never tried Glitterati candy, but now I’m curious.

To bolster sales, said the advisers, many of whom spoke on the condition of anonymity because they feared retribution, JPMorgan largely pushes its own bank-branded investments, which include a mix of mutual funds. While the practice can be legal, competitors have moved away from such investments after facing perceived conflicts. The concern is that, driven by fees, banks will push their own products over lower-cost options with stronger returns.

Some JPMorgan brokers said that the bank did not allow them to disclose the performance of the investment portfolios they marketed until customers bought the products, so prospective clients did not have a clear understanding of what they were buying.

JPMorgan advisers were trained to place a higher priority on their employer’s revenue than on clients’ portfolio returns.

Successful Adviser Says He Was Fired for Not Selling Enough JPMorgan Products

The article details the case of former JPMorgan financial adviser Johnny Burris, who “was called into a meeting with his managers…to discuss why he wasn’t selling the bank’s products, [Mr. Burris] said. Mr. Burris said he favored traditional mutual funds with strong records and the usual protections.” That sounds like a reasonable, customer-oriented point of view. But not to Mr. Burris’ managers.

Evidently sensing his future at JPMorgan might be shortened because of his non-conformist (my word) perspective on serving clients, Mr. Burris began secretly taping conversations with his superiors. Mr. Burris was indeed fired, and he has filed an arbitration claim against JPMorgan for wrongful dismissal.

Among conversations he taped are admonishments from one of Mr. Burris’ managers that his failure to sell JPMorgan products over the prior three months looked “a bit odd,” and another from a different manager telling Burris, that “a couple little glitches”—which Mr. Burris says were that he was not selling enough in-house products—had to be overcome before Mr. Burris could be elevated to JPMorgan’s elite adviser group. (The Times article includes links to some of the fascinating recordings Mr. Burris made of his managers.)

Though Mr. Burris did make the cut and was promoted to JPMorgan’s elite adviser group, soon after his promotion the same manager who’d told Burris his lack of sales of JPMorgan products looked odd told him bluntly “I’m not questioning your sales numbers. I’m not questioning the assets you’re bringing in. What I’m saying to you is you’re not embracing the JPMorgan private-bank platform.” In other words, get with the program, Burris.

Are All Financial Advisers Like JPMorgan’s Elite Adviser Team?

The JPMorgan aggressive sales approach may be an extreme, I don’t know. But in my mind it goes without saying that, no matter what you’re buying and no matter from whom, understand that the seller puts their own and their employer’s interests ahead of your interests. I’m not criticizing, just saying that’s simply the way it is, and you’re dangerously naive to think otherwise, in my view.

Only you put your interests first. So if you’re involved with a financial adviser, it’s best to become educated enough to ask pertinent questions and be able to recognize when you may be getting “JPMorgan-ized.”

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