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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  • Brick By Brick Investing

    I’ve been doing some heavy thinking in regards to take the plunge of becoming a financial advisor but from all of my friends and contacts I’m hearing you’re more of a salesperson than an advisor. This article solidifies that theory, it’s a shame because people seek out these professionals.

    • I’ve thought about the advising gig myself at various times in my life, but, like you, what attracts me is the advising part. If I could hire someone who enjoys selling to recruit clients for me, I’d be in good shape!

    • How about the fee-only advisors? Aren’t they suppose to be above all that since they shouldn’t try to sell you anything.

  • John S @ Frugal Rules

    Good post Kurt! While I do think there are some good apples out there, I do believe that you have to wade through a truckload of crappy ones to find them. Speaking personally from my brokerage days, it does come down to selling the in house product over anything else. So, the ultimate driver is that asset gathering you’re talking about and the goal is sales, sales and more sales as opposed to helping people manage their money and make wise decisions. I interviewed with at least 20 outfits wanting to be an advisor and every single one wanted to know how much I could sell and said that “meeting the numbers” was the ultimate goal. At the end of it I just gave up as I want to help people and not fleece them because they’re ignorant or need help. I get the importance of sales, but when that is the overarching goal then a major conflict of interest enters in to the equation. I could not agree more that you are he only one who’ll always put your priorities 100% of the time. Sorry for the rant, I could write a post on this myself and probably will at some point. 🙂

    • Don’t be sorry, I enjoy rants! Yes, please write on this topic, would be particularly interesting to read from an ‘insider.’

      Maybe there are firms that embrace the philosophy that encouraging advisers to put first helping customers meet their goals is the best way for the firm to meet its goals. What a concept!

  • Kurt, I have my own bitter experience with the gatherers (see my Sucker story on my website) which cost me 30,000 dollars dealing with those jerks. But it was completely my fault. I was ignorant totally about their practices and goals. It is said, because many people who do not know how to invest and search for advice got scammed by these jerks.

    • I’ll read your story, but I think you’re being a bit hard on yourself when you say “it was completely my fault”. If you don’t lock your home’s door and a thief makes off with your stuff, I think the thief bears some responsibility for the loss, no?

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