“We’re not making enough money off you”

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Badger1754
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“We’re not making enough money off you”

Post by Badger1754 » Sun Apr 01, 2018 4:11 pm

I am helping out my in-laws with some of their financial affairs.

Today, while recovering from Passover, my FIL mentioned that he got a strange phone call from his financial advisor (Morgan Stanley Smith Barney) a few weeks ago. FIL is a wise, smart, retired corporate executive with lots of “sechel” (Yiddish for “business sense”). He was using the MSSB for wealth management, estate planning, tax advisory, and certain below-market-rate loans to fund his portfolio as he got into small business sponsorship after he retired. Anyway, the wealth management all sits in passive, the estate planning is taken care of, and the tax advisory is pretty straightforward. So, basically, he’s using them for the below-market-rate loans, which is a pretty good deal.

The MSSB folks kindly informed him that “we’re not making enough money off of you”, that MSSB’s production quota and compensation matrix had changed, and that unless he agreed to switch assets into an actively managed account, they would no longer extend to him the special loan service when the next refi cycle is up and might downgrade him to a lower tier of service (even though his assets clearly place him at their higher tier).

Amazingly, his first reaction was “well, that’s fair, I have been taking advantage of them for years, maybe I should pay up”. Anyway, long story short, I talked him off that ledge, and we’re now looking for alternatives.

However, I am amazed that retail/HNW advisors would just come out and say that. It’s almost as if their entire corporate strategy is geared toward frequent trading activity and the generation of fees/commissions regardless of whether it was good for the client. Moreover, if my FIL threatened to move his assets away to another firm, are things so bad that they would rather lose him? I’d honestly be curious as to what they would say to that.

(OK, I just re-read that last paragraph and realized how absurd that sounded. But I was still shocked, they came right out and said that.)

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Re: “We’re not making enough money off you”

Post by retiredjg » Sun Apr 01, 2018 4:28 pm

It is not surprising that they no longer want to loan him money at special rates since there is no profit in it for them.

It is not absurd that "their entire corporate strategy is geared toward frequent trading activity and the generation of fees/commissions regardless of whether it was good for the client." That is the ugly truth of the situation.

It is surprising that they admit it all that readily.

He should not give in to their pressure by moving to active management. He should just not look for special rates on loans. That's fair enough.

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Re: “We’re not making enough money off you”

Post by willthrill81 » Sun Apr 01, 2018 4:31 pm

A number of years ago, Verizon ended its relationship with tens of thousands of its customers in one fail swoop. At the same time, they also issued a press release stating that they were doing this because these customers were constantly complaining, spending huge amounts of time with Verizon's customer service support teams, and that Verizon was losing money hand over fist with them. Obviously, none of the disowned customers wanted to self-identify. So this isn't entirely unprecedented. There has been a big push for years now to identify, mathematically, what the customer lifetime value is for every single one of a firm's customers. Some firms then take this information to decide how much attention some of their customers get and which customers get the boot.

Firms aren't running charities; they cannot exist if they cannot turn a profit.
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Re: “We’re not making enough money off you”

Post by Badger1754 » Sun Apr 01, 2018 4:33 pm

This all started when his advisor of 30+ years began paring back and preparing to retire himself. His advisor was an MSSB lifer and I think was able to protect my FIL from the directives to upsell, cross-sell, and JFS (“just sell”) because his book of business as a whole was doing well. A year or two ago, he began to shift toward a “co-coverage” model where a younger guy began looking after parts of the book. It was the younger guy who made the call and said “we’re not making enough money off you”. Who knows, maybe the older guy got grandfathered in, while the younger guy is the one hit with the higher production quota, comp matrix, etc.

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nedsaid
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Re: “We’re not making enough money off you”

Post by nedsaid » Sun Apr 01, 2018 4:34 pm

We have to be aware that service providers have to make a buck too. The business model has to work. Though Morgan Stanley was blunt, your Father-In-Law is getting to be a drag on their bottom line. I think I would look at the Groucho Marx solution, just as he switched Doctors when he was told to give up wine, women, and song; your Father-In-Law ought to switch brokers.

My suspicion is that the good folks at a place like Charles Schwab or Fidelity would be happy to talk to your FIL. My opinion of Morgan Stanley isn't the greatest and I will leave it at that.

If I got a call like that, particularly if I was a long term customer, I would be talking to competitors. I would let them know of your unhappiness. My guess is that the big "full-service" brokers are all like that. I would take the business model of whoever you go to in consideration when making a switch. I caution people that wanting lots of service while paying little or nothing for it is not sustainable. If you need ongoing advice, you will have to pay.

Probably the best solution would be to pay for advice by the hour and then take the recommendations to a cheaper investment platform.

There was a fellow on the forum that poo-pooed me when I said that Fidelity customers ought to let the company make a little money off of them. Perhaps invest mostly in Fidelity's low cost index funds and perhaps one or two of their lower cost active funds. It seems counterintuitive but at some point, if you want service, you have to pay. Think of all the complaints here on the forum about Vanguard customer service. If all you want are rock bottom fees, something has to give somewhere. In the search for lower costs, customer service is one of the first things to go.
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Re: “We’re not making enough money off you”

Post by chevca » Sun Apr 01, 2018 4:35 pm

"Where are the customer's yachts" comes to mind... :happy

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Re: “We’re not making enough money off you”

Post by Badger1754 » Sun Apr 01, 2018 4:35 pm

willthrill81 wrote:
Sun Apr 01, 2018 4:31 pm
Firms aren't running charities; they cannot exist if they cannot turn a profit.
Hey as someone who had a front-row seat to the Wall Street carnage of 2008 and its bloody aftermath (and as a guy whose portfolio is structurally overexposed to the FIG sector), I’ll be the first to give two thumbs up in approval to that. What I didn’t realize was that “firing customers” had reached the upper echelons of financial services.

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Re: “We’re not making enough money off you”

Post by Grt2bOutdoors » Sun Apr 01, 2018 4:36 pm

Money isn’t free - your father in law understands that. Those below market loans are “loss leaders” meant to bring in other business, when that business fails to materialize then bluntness sometimes is the only way to hammer the point home. Over staying ones welcome makes for poor company.
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Re: “We’re not making enough money off you”

Post by Grt2bOutdoors » Sun Apr 01, 2018 4:37 pm

Badger1754 wrote:
Sun Apr 01, 2018 4:35 pm
willthrill81 wrote:
Sun Apr 01, 2018 4:31 pm
Firms aren't running charities; they cannot exist if they cannot turn a profit.
What I didn’t realize was that “firing customers” had reached the upper echelons of financial services.
Times change; happens all the time. It’s business, not personal.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: “We’re not making enough money off you”

Post by nedsaid » Sun Apr 01, 2018 4:38 pm

Badger1754 wrote:
Sun Apr 01, 2018 4:33 pm
This all started when his advisor of 30+ years began paring back and preparing to retire himself. His advisor was an MSSB lifer and I think was able to protect my FIL from the directives to upsell, cross-sell, and JFS (“just sell”) because his book of business as a whole was doing well. A year or two ago, he began to shift toward a “co-coverage” model where a younger guy began looking after parts of the book. It was the younger guy who made the call and said “we’re not making enough money off you”. Who knows, maybe the older guy got grandfathered in, while the younger guy is the one hit with the higher production quota, comp matrix, etc.
Bingo. That is exactly what happened. It worked for the older advisor but doesn't work for the younger guy trying to get established. The younger guy probably has a maniacal sales manager breathing down his neck. An alternative would be to switch to someone else at the same firm who is more established. Again, the Groucho Marx solution is in order.
A fool and his money are good for business.

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Re: “We’re not making enough money off you”

Post by Badger1754 » Sun Apr 01, 2018 4:39 pm

Grt2bOutdoors wrote:
Sun Apr 01, 2018 4:36 pm
Money isn’t free - your father in law understands that. Those below market loans are “loss leaders” meant to bring in other business, when that business fails to materialize then bluntness sometimes is the only way to hammer the point home. Over staying ones welcome makes for poor company.
Grt2bOutdoors wrote:
Sun Apr 01, 2018 4:37 pm
Times change; happens all the time. It’s business, not personal.
Well understood on all fronts! Just surprising to be told so bluntly.

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Re: “We’re not making enough money off you”

Post by Hillview » Sun Apr 01, 2018 4:42 pm

My Northwestern Mutual life insurance guy has told me the same. Prior services not being offered (financial plans etc) as I've moved away from his expensive/high margin products. I think it means you are doing something right. :D

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Re: “We’re not making enough money off you”

Post by nisiprius » Sun Apr 01, 2018 4:42 pm

I haven't been tracking corporate management fads lately. For a while in the early 1990s I worked at a Fortune 500 company that among other things had a corporate library with all the things like Harvard Business Journal, and assorted $495/year newsletters, etc. At one time it was a management fad that companies ought to be deliberately obnoxious to their less-profitable customers, and try to drive them into the hands of their competitors. Perhaps some of that survives on Wall Street.
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Re: “We’re not making enough money off you”

Post by neilpilot » Sun Apr 01, 2018 4:48 pm

nisiprius wrote:
Sun Apr 01, 2018 4:42 pm
At one time it was a management fad that companies ought to be deliberately obnoxious to their less-profitable customers, and try to drive them into the hands of their competitors. Perhaps some of that survives on Wall Street.
What you consider "obnoxious" others might consider honest and direct. I for one would prefer the message delivered to the OP's FIL than suffer through a reduction in service from a FA firm that no longer wants my business but isn't willing to communicate clearly.

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Re: “We’re not making enough money off you”

Post by nedsaid » Sun Apr 01, 2018 4:51 pm

I have worked with an Independent broker for about 21 years now. I don't trade much and I have actually brought this up with him. Number one, I am a relatively small fish and number two I don't generate a lot of commission income. Pretty much, he said that he treats all customers the same.

So I have purchased load funds with lower expense ratios from him, partly to throw him a bone. I have learned a lot from him over the years and he needs to get something out of it. He does receive the 12(b)1 fees from my load funds, so he gets a little something even in a year that I don't trade very much.

I also call him about once a month. During the recent market turmoil, I haven't called him at all.

A couple times, he has run my whole portfolio, including stuff I own outside my accounts with him, through Morningstar software to analyze my holdings. It takes time and it has been probably 10 years or so since he ran the last one.

What I am trying to say is there has to be a relationship between the amount of revenue I generate and the amount of time I spend with him. I don't want to wear out my welcome so I try not to be a demanding client.
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Re: “We’re not making enough money off you”

Post by Portfolio7 » Sun Apr 01, 2018 4:56 pm

DW is a partner in a small CPA firm. They have fired many customers on the basis of how difficult they are to work with (I want to note that it has nothing to do with the difficulty of the client's tax situation, in fact sometimes the more complex the better, given the range of talent in the firm. After the heavy lifting to dig into it fully in year 1, subsequent years are typically much easier to handle.) They have also raised rates, knowing that marginal clients will leave. I believe they've grandfathered some favorite clients with the old rates. For this to work best you obviously want to have plenty of new clients, but the point is that this approach has made their business healthier and their lives far more stress free.
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Re: “We’re not making enough money off you”

Post by retiredjg » Sun Apr 01, 2018 4:58 pm

I don't think they are "firing" their customer although they might hope for that result. It appears to me the first guy was willing to give Dad a little special treatment and the new guy is not. There is little that can be done for that.

What I understood is they are no longer willing to give Dad a "nice ride" on the loans unless he does....whatever. If he does not do....whatever, he just won't get the special rate on the loans. That does not mean he needs to move assets if he does not want to.

Having said that, I would never give them my money. Ever. But for him, moving the money might have some alarming tax consequences. He might prefer to stay and find his loans elsewhere. Or get on board with their usual loan program.

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Re: “We’re not making enough money off you”

Post by madbrain » Sun Apr 01, 2018 5:01 pm

willthrill81 wrote:
Sun Apr 01, 2018 4:31 pm
A number of years ago, Verizon ended its relationship with tens of thousands of its customers in one fail swoop. At the same time, they also issued a press release stating that they were doing this because these customers were constantly complaining, spending huge amounts of time with Verizon's customer service support teams, and that Verizon was losing money hand over fist with them. Obviously, none of the disowned customers wanted to self-identify. So this isn't entirely unprecedented. There has been a big push for years now to identify, mathematically, what the customer lifetime value is for every single one of a firm's customers. Some firms then take this information to decide how much attention some of their customers get and which customers get the boot.

Firms aren't running charities; they cannot exist if they cannot turn a profit.
I didn't hear about the Verizon story. I am wondering why they are allowed to do that, though, given that they are regulated as a communications utility. Surely the customers must have had some sort of recourse, especially if Verizon was the only carrier in their area.

A search on this topic only found this . Seems like a different story - customers complaining because of overcharges on data.
http://kutv.com/news/get-gephardt/veriz ... -customers

Maybe this is a different issue since you mentioned something happening several years ago.

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Re: “We’re not making enough money off you”

Post by willthrill81 » Sun Apr 01, 2018 5:08 pm

madbrain wrote:
Sun Apr 01, 2018 5:01 pm
willthrill81 wrote:
Sun Apr 01, 2018 4:31 pm
A number of years ago, Verizon ended its relationship with tens of thousands of its customers in one fail swoop. At the same time, they also issued a press release stating that they were doing this because these customers were constantly complaining, spending huge amounts of time with Verizon's customer service support teams, and that Verizon was losing money hand over fist with them. Obviously, none of the disowned customers wanted to self-identify. So this isn't entirely unprecedented. There has been a big push for years now to identify, mathematically, what the customer lifetime value is for every single one of a firm's customers. Some firms then take this information to decide how much attention some of their customers get and which customers get the boot.

Firms aren't running charities; they cannot exist if they cannot turn a profit.
I didn't hear about the Verizon story. I am wondering why they are allowed to do that, though, given that they are regulated as a communications utility. Surely the customers must have had some sort of recourse, especially if Verizon was the only carrier in their area.

A search on this topic only found this . Seems like a different story - customers complaining because of overcharges on data.
http://kutv.com/news/get-gephardt/veriz ... -customers

Maybe this is a different issue since you mentioned something happening several years ago.
This was around a decade ago, and I can't find anything on the web about it now.
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Re: “We’re not making enough money off you”

Post by Badger1754 » Sun Apr 01, 2018 5:08 pm

nedsaid wrote:
Sun Apr 01, 2018 4:38 pm
Badger1754 wrote:
Sun Apr 01, 2018 4:33 pm
This all started when his advisor of 30+ years began paring back and preparing to retire himself. His advisor was an MSSB lifer and I think was able to protect my FIL from the directives to upsell, cross-sell, and JFS (“just sell”) because his book of business as a whole was doing well. A year or two ago, he began to shift toward a “co-coverage” model where a younger guy began looking after parts of the book. It was the younger guy who made the call and said “we’re not making enough money off you”. Who knows, maybe the older guy got grandfathered in, while the younger guy is the one hit with the higher production quota, comp matrix, etc.
Bingo. That is exactly what happened. It worked for the older advisor but doesn't work for the younger guy trying to get established. The younger guy probably has a maniacal sales manager breathing down his neck. An alternative would be to switch to someone else at the same firm who is more established. Again, the Groucho Marx solution is in order.
Btw, that younger guy hasn’t (as far as I can tell) figured out I — or my wife — exist yet. Which is a good thing. Because I think he’ll be a heck of a lot more persistent than the NW guys.

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Re: “We’re not making enough money off you”

Post by nedsaid » Sun Apr 01, 2018 5:11 pm

Badger1754 wrote:
Sun Apr 01, 2018 5:08 pm
nedsaid wrote:
Sun Apr 01, 2018 4:38 pm
Badger1754 wrote:
Sun Apr 01, 2018 4:33 pm
This all started when his advisor of 30+ years began paring back and preparing to retire himself. His advisor was an MSSB lifer and I think was able to protect my FIL from the directives to upsell, cross-sell, and JFS (“just sell”) because his book of business as a whole was doing well. A year or two ago, he began to shift toward a “co-coverage” model where a younger guy began looking after parts of the book. It was the younger guy who made the call and said “we’re not making enough money off you”. Who knows, maybe the older guy got grandfathered in, while the younger guy is the one hit with the higher production quota, comp matrix, etc.
Bingo. That is exactly what happened. It worked for the older advisor but doesn't work for the younger guy trying to get established. The younger guy probably has a maniacal sales manager breathing down his neck. An alternative would be to switch to someone else at the same firm who is more established. Again, the Groucho Marx solution is in order.
Btw, that younger guy hasn’t (as far as I can tell) figured out I — or my wife — exist yet. Which is a good thing. Because I think he’ll be a heck of a lot more persistent than the NW guys.
It could be that the other advisors with the firm didn't want FIL as a client either. Sounds like time to move on.
A fool and his money are good for business.

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Re: “We’re not making enough money off you”

Post by maroon » Sun Apr 01, 2018 5:20 pm

delete
Last edited by maroon on Sun Apr 08, 2018 12:28 am, edited 2 times in total.

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Re: “We’re not making enough money off you”

Post by Good Listener » Sun Apr 01, 2018 5:35 pm

I have no dog in this fight and only use Vanguard and never would use a money management firm. Fill in the XXxX. The profession Xxxxx provides services at below cost for clients from whom they don't make profit.
Last edited by Good Listener on Mon Apr 02, 2018 2:42 pm, edited 1 time in total.

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Re: “We’re not making enough money off you”

Post by nisiprius » Sun Apr 01, 2018 5:46 pm

Good Listener wrote:
Sun Apr 01, 2018 5:35 pm
I habe no dog in this fight and only use Vanguard and never would use a money management firm. Fill in the XXxX. The profession Xxxxx provides services at below cost for clients from whom they don't make profit.
Xxxxx = lawyers doing pro bono work.
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Re: “We’re not making enough money off you”

Post by FrugalInvestor » Sun Apr 01, 2018 5:54 pm

I applaud MSSB for being honest about the situation. It gives your FIL the opportunity to pay more for service he values or make other arrangements if he feels the added cost is not justified. It sounds like he's known that he's been getting a sweet deal, the question is how much is the service really worth to him, does he need it at allm or can he get it elsewhere at a better value given the increasing cost at MSSB.
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Re: “We’re not making enough money off you”

Post by DaftInvestor » Sun Apr 01, 2018 6:00 pm

If your FIL has sechel he shouldn't be surprised.

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Re: “We’re not making enough money off you”

Post by Fallible » Sun Apr 01, 2018 6:02 pm

Badger1754 wrote:
Sun Apr 01, 2018 4:11 pm
...
The MSSB folks kindly informed him that “we’re not making enough money off of you”, that MSSB’s production quota and compensation matrix had changed, and that unless he agreed to switch assets into an actively managed account, they would no longer extend to him the special loan service when the next refi cycle is up and might downgrade him to a lower tier of service (even though his assets clearly place him at their higher tier).
...
However, I am amazed that retail/HNW advisors would just come out and say that. ...I was still shocked, they came right out and said that.)
I wouldn't be shocked or amazed if they said that, but maybe a little surprised. Thing is, I wonder if those were the exact words and even how they were uttered (sarcastically, matter-of-fact, angrily, flippantly, carelessly out of frustration, as a last resort to be understood, etc.) and even at what point in the conversation they were said - as a blunt opening, or at the end of a long and carefully detailed explanation of the situation, or in response to something the FIL said. We also don't know all of the conversation that took place. Not knowing any of this, I'd withhold judgement.
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Re: “We’re not making enough money off you”

Post by 123 » Sun Apr 01, 2018 6:16 pm

Granted that it is easier to consolidate assets to take advantage of certain tiers of service at some brokerages. But is may be time to diversify some assets away from MSSB if they are intending to reduce the preferential pricing he receives. Perhaps he should shop around and see what he can get elsewhere for his assets. When brokers are looking to increase revenue the easiest targets are the "big fish". Maybe he would do better if he doesn't stand out as a "big fish" at MSSB or elsewhere.
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Re: “We’re not making enough money off you”

Post by Pajamas » Sun Apr 01, 2018 6:36 pm

I find that level of frankness and honesty refreshing.

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Re: “We’re not making enough money off you”

Post by alpenglow » Sun Apr 01, 2018 6:46 pm

Badger1754 wrote:
Sun Apr 01, 2018 4:11 pm
with lots of “sechel” (Yiddish for “business sense”)
I love learning new Yiddish words. Thanks!

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Re: “We’re not making enough money off you”

Post by Rick Ferri » Sun Apr 01, 2018 7:10 pm

When I was a broker in the 1990s, I put my clients stock money in SPY (S&P 500) and MDY (S&P mid-cap) and held them both, bought and held individual bonds until maternity, then bought 10% in a managed commodities fund that had 6% per year in fees. I told the clients they didn’t need commodities, but I needed the revenue to keep my job. They understood.
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Re: “We’re not making enough money off you”

Post by beardsworth » Sun Apr 01, 2018 7:26 pm

Rick Ferri wrote:
Sun Apr 01, 2018 7:10 pm
bought and held individual bonds until maternity,
Nine months isn't a very long holding period for bonds. :)

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Re: “We’re not making enough money off you”

Post by bogglehead125 » Sun Apr 01, 2018 7:34 pm

Were these loans below FFR if margin lending? Curious what a below market loan looks like

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Re: “We’re not making enough money off you”

Post by jdb » Sun Apr 01, 2018 7:43 pm

nedsaid wrote:
Sun Apr 01, 2018 4:34 pm
I think I would look at the Groucho Marx solution, just as he switched Doctors when he was told to give up wine, women, and song; your Father-In-Law ought to change brokers.
Total digression but thanks for the Groucho Marx quote, he is one of my favorites. Other quote I like is an interview during height of his career with business journal, asked about his investments, he said all his money was in US treasuries. Interviewer said that can’t make much return on US treasuries. Groucho said yes if you have enough of them. Thanks.

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Re: “We’re not making enough money off you”

Post by nedsaid » Sun Apr 01, 2018 8:01 pm

Rick Ferri wrote:
Sun Apr 01, 2018 7:10 pm
When I was a broker in the 1990s, I put my clients stock money in SPY (S&P 500) and MDY (S&P mid-cap) and held them both, bought and held individual bonds until maternity, then bought 10% in a managed commodities fund that had 6% per year in fees. I told the clients they didn’t need commodities, but I needed the revenue to keep my job. They understood.
Wow Rick, you had smart and understanding clients. Pretty much, the managed commodities fund was a proxy for an Assets Under Management fee. It probably also explains your dislike for commodities. Your clients liked you and understood a bit how business works.
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Re: “We’re not making enough money off you”

Post by Rick Ferri » Mon Apr 02, 2018 7:33 am

Advisers have to charge enough in fees to be around when client’s really need them.

The mistakes many advisers make over fees are 1) not having a frank discussion about fees with clients, 2) assume clients won’t pay the fee if all the adviser does is buy and hold a fee index funds, 3) assume clients will fire them if a cheaper adviser who does the same thing comes along.

These insecurities hurt an adviser’s business. What they fail to understand is an open and honest conversation with clients about these fears usually alleviates the adviser’s paranoia.
The Education of an Index Investor: starts in darkness, finds enlightenment, overcomplicates everything, accepts simplicity.

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Re: “We’re not making enough money off you”

Post by Badger1754 » Mon Apr 02, 2018 7:54 am

Rick Ferri wrote:
Mon Apr 02, 2018 7:33 am
Advisers have to charge enough in fees to be around when client’s really need them.

The mistakes many advisers make over fees are 1) not having a frank discussion about fees with clients, 2) assume clients won’t pay the fee if all the adviser does is buy and hold a fee index funds, 3) assume clients will fire them if a cheaper adviser who does the same thing comes along.

These insecurities hurt an adviser’s business. What they fail to understand is an open and honest conversation with clients about these fears usually alleviates the adviser’s paranoia.
Let me be the first to offer support to Rick Ferri’s points. I am perfectly open to paying appropriate financial advisory fees — as long as the advisor is philosophically aligned with us. In fact, my wife and I are evaluating several at the moment, including Vanguard PAS. What does cheese me off is when an insurance salesman assumes I am stupid and tries to pitch me suboptimal, high-fee garbage in the guise of dispassionate professional advice.

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Re: “We’re not making enough money off you”

Post by djpeteski » Mon Apr 02, 2018 7:58 am

I applaud their honesty. It allows your FIL to make a good business decision. How much do I have to put in an actively managed fund to get the services I want? Is it then worth it? The answer could be yes.

Assuming that he has to put x amount into an actively managed fund, and he estimates that it will cost him 5k per year to do so. If he receives a 10K benefit for the other services then why not?

The young account guy also displayed some “sechel” and more importantly respect for your FIL. That says a lot about this young guy IMHO.

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Re: “We’re not making enough money off you”

Post by carolinaman » Mon Apr 02, 2018 8:13 am

nisiprius wrote:
Sun Apr 01, 2018 4:42 pm
I haven't been tracking corporate management fads lately. For a while in the early 1990s I worked at a Fortune 500 company that among other things had a corporate library with all the things like Harvard Business Journal, and assorted $495/year newsletters, etc. At one time it was a management fad that companies ought to be deliberately obnoxious to their less-profitable customers, and try to drive them into the hands of their competitors. Perhaps some of that survives on Wall Street.
When I was in business I would love for my competition to have my problem customers. Then I took a job providing internal services in another organization and was stuck with the bad customers.

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Re: “We’re not making enough money off you”

Post by DetroitRick » Mon Apr 02, 2018 8:49 am

My inlaws got a similar notification during a visit from their financial advisor in mid 2007. Maybe it is not rare. Their situation was simpler than yours, just a brokerage account and two ira's. But that's exactly what they were told. "I can't continue to handle your account unless you continue to add to your investments. We're not making enough money". 3 midsize accounts were involved and the firm was clearly making money. The folks had been with this advisor for at least 5 years prior to the notification, originally at AG Edwards, then moved with him to H&R Block in early 2007.

In our case (our, because my inlaws involved me), I really didn't respect the honesty. These folks were retired for the whole time they were under this clown/advisor, so he knew there was little possibility of expanding holdings right from the start. It was a pure pressure move on elderly adults. When I started a deep dive into what he had done, because my inlaws by that time suspected outright fraud (they were wrong), I saw the reason behind the pressure. Heavy front-end loads. There were other issues too, but he needed those loads to keep coming. Churning, which he also did, wasn't enough. And there was no meaningful advice ever given - no discussion of risks, asset allocation, market conditions, or anything. 75% of holdings were totally inappropriate, 25% were mediocre. Frankly, when I figured it all out, it made my blood boil.

It ended well though, once 2009 was over (at least). Pulled money in Nov 2007, transferred to Schwab, and I took over the role myself to rebuild. Which ultimately happened. He was warned to stay away, and did. So he made at least one good choice in life.

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Re: “We’re not making enough money off you”

Post by Badger1754 » Mon Apr 02, 2018 8:57 am

DetroitRick wrote:
Mon Apr 02, 2018 8:49 am
In our case (our, because my inlaws involved me), I really didn't respect the honesty. These folks were retired for the whole time they were under this clown/advisor, so he knew there was little possibility of expanding holdings right from the start. It was a pure pressure move on elderly adults. When I started a deep dive into what he had done, because my inlaws by that time suspected outright fraud (they were wrong), I saw the reason behind the pressure. Heavy front-end loads. There were other issues too, but he needed those loads to keep coming. Churning, which he also did, wasn't enough. And there was no meaningful advice ever given - no discussion of risks, asset allocation, market conditions, or anything. 75% of holdings were totally inappropriate, 25% were mediocre. Frankly, when I figured it all out, it made my blood boil.
A few years ago (when I was still working in financial services), I was part of a focus group that assembled a cross-section of professionals across the industry. One guy there was an investment advisor. He was asked “how do you determine what mutual funds to put your clients in? How do you pick between Fidelity, Capital Group, Schwab, T Rowe Price, etc. if you had a choice of, say, 10?” His answer: “That’s easy, I’ll put them in all 10, split evenly.” “Why?” “Well, they perform about the same, and that way I protect my revenue by diversifying my A share fees.”

Think about what he said. “Protect my revenue”. “Diversify my A share fees”. Not a word about his clients. Who certainly (after him) didn’t have yachts anymore.

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Re: “We’re not making enough money off you”

Post by wrongfunds » Mon Apr 02, 2018 10:20 am

Firms aren't running charities; they cannot exist if they cannot turn a profit.


How about your medical insurance decides to insure you only if they can make sure you will not get expensive to cure diseases via genetic type testing? Where do you draw the line?

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Re: “We’re not making enough money off you”

Post by feehater » Mon Apr 02, 2018 10:29 am

wrongfunds wrote:
Mon Apr 02, 2018 10:20 am
Firms aren't running charities; they cannot exist if they cannot turn a profit.


How about your medical insurance decides to insure you only if they can make sure you will not get expensive to cure diseases via genetic type testing? Where do you draw the line?
I've never done business with a bank or credit card company that's turned a profit on me. Never paid for a checking account, never carried a credit card balance, never paid an annual fee except for the one year I got the chase Sapphire reserve and got tons of bonuses for it. I realize that these companies are in turn making up for me by raking in the fees from less suspecting customers. But for this reason, I've never bought the argument that brokerage fees must have some inherent floor or that we should be happy to pay some amount of fees to sustain their current business model.

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Re: “We’re not making enough money off you”

Post by neilpilot » Mon Apr 02, 2018 10:40 am

feehater wrote:
Mon Apr 02, 2018 10:29 am

I've never done business with a bank or credit card company that's turned a profit on me. Never paid for a checking account, never carried a credit card balance, never paid an annual fee except for the one year I got the chase Sapphire reserve and got tons of bonuses for it. I realize that these companies are in turn making up for me by raking in the fees from less suspecting customers. But for this reason, I've never bought the argument that brokerage fees must have some inherent floor or that we should be happy to pay some amount of fees to sustain their current business model.
Assuming you actually use your credit card(s), you do realize that the issuer collects merchant fees that provide a reasonable compensation?

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Re: “We’re not making enough money off you”

Post by willthrill81 » Mon Apr 02, 2018 10:45 am

wrongfunds wrote:
Mon Apr 02, 2018 10:20 am
Firms aren't running charities; they cannot exist if they cannot turn a profit.


How about your medical insurance decides to insure you only if they can make sure you will not get expensive to cure diseases via genetic type testing? Where do you draw the line?
Again, firms aren't running charities, and without a profit, they will cease to exist. I do not know where the 'line' must be drawn, but those are facts.

But if such genetic type testing was available, you wouldn't need insurance at all, at least for those specific diseases.
neilpilot wrote:
Mon Apr 02, 2018 10:40 am
Assuming you actually use your credit card(s), you do realize that the issuer collects merchant fees that provide a reasonable compensation?
Precisely. But even so, the credit card companies are playing a numbers game. They know that some people will default and declare bankruptcy, and this is baked into the interest rates. Overall, they're doing quite well for themselves.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: “We’re not making enough money off you”

Post by wrongfunds » Mon Apr 02, 2018 11:08 am

But if such genetic type testing was available, you wouldn't need insurance at all, at least for those specific diseases.
Can you explain? I don''t want to guess why you are thinking this way. All I have are very macabre thoughts for "not needing insurance"!

I think once those type of testing is available and accepted, the insurance company will no longer insure you if they realize that dropping you will be more advantageous to their bottom line. I hope you don't suddenly want government to put restriction on the insurance company or horrors of horrors, government itself being the health insurer!

To be perfectly honest, that is the only way this system is ever going to be fixed aka only when *lots* of people end up at the wrong end of this free market.

Somebody just mentioned $2M in prescription drugs cost. Do you think insurance companies will cover that without being forced by some "higher authority" if they had an inclination of that cost before offering the insurance?
Last edited by wrongfunds on Mon Apr 02, 2018 11:10 am, edited 1 time in total.

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Re: “We’re not making enough money off you”

Post by mickeyd » Mon Apr 02, 2018 11:09 am

I am shocked, shocked, that financial institutions are admitting that they are in this for the money!
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Re: “We’re not making enough money off you”

Post by Clever_Username » Mon Apr 02, 2018 11:11 am

Periodically, I hear about internet movements to get people to close their BofA accounts to protest the latest low-funds fee (monthly fee for checking if under a certain amount, etc). I sometimes wonder if these movements are started by BofA to get customers they lose money on out the door.
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Re: “We’re not making enough money off you”

Post by willthrill81 » Mon Apr 02, 2018 11:12 am

wrongfunds wrote:
Mon Apr 02, 2018 11:08 am
But if such genetic type testing was available, you wouldn't need insurance at all, at least for those specific diseases.
Can you explain? I don''t want to guess why you are thinking this way. All I have are very macabre thoughts for "not needing insurance"!
My tongue-in-cheek point was that if genetic testing truly allows you to know whether you'll get a specific disease or not, I would not need insurance coverage for that disease if I know that I won't get it.

I will not address further posts on this issue since that would derail the thread further.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: “We’re not making enough money off you”

Post by wrongfunds » Mon Apr 02, 2018 11:19 am

There are no tests for disease which tell you that you will NEVER get that specific disease. So I don't think you could use it to opt out of the coverage for that particular disease.

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