Thursday, April 15th, 2010
I’m fixing breakfast this morning and I see a TV commercial coming on. Something along the lines of, “Have the big brokerage firms let you down? Come talk to us. We’ve got neighborhood offices. We’ll get to know you. We don’t have any proprietary or in-house products. We’re here to be your friend and help you out.”
Really?
About 3 years ago, a client brought some paperwork to us from the same company, after they had sold a mutual fund. I’m looking at the paperwork and I see this note at the bottom that says, “Refer to our mutual fund disclosure document” in really small print like this.
So I flip the page and here’s what the fine print said. “XYZ Company receives payments, known as revenue sharing, from preferred fund families which currently include American Funds, Franklin Templeton, Goldman Sachs, Hartford, Lord Abbot, Oppenheimer, Putnam, and Federated. Such revenue sharing involves a payment from a mutual fund company. XYZ, its investment representatives, investment companies and shareholders benefit financially from the receiving of revenue sharing payments from mutual fund families like these. As a result this creates a potential conflict of interest in the form of additional payments to the firm. These payments are in addition to the standard sales commissions and management fees.
And while we may offer many mutual fund families, revenue sharing creates incentive for the selection and sales of preferred funds.”
And here’s the clincher, “Virtually all of our sales of mutual funds are in these fund families.”
So here we’ve got a brokerage firm advertising on TV, telling you they don’t create their own mutual fund products – meaning their representatives are supposedly free to pick and choose the best fund for their client. But when you read the fine print, you find maybe 8 mutual fund companies that are paying extra for this brokerage firm to use them!
Have they ‘technically’ broken any law? No. But is this really the kind of company you want to be getting your financial advice from?
And doesn’t it make you wonder where they got all that money to pay for the air time of TV commercial???
A friendly reminder – always read the fine print, even if you need a magnifying glass to see it.
Tags: brian Fricke, certified financial planner, finance, financial advisor, Financial Management Concepts, financial planner, Financial planning, retirement, retirement planning, wealth management
