Who’s Managing Your Investments?

Posted by on Sep 6, 2012 in Personal Finance | 2 comments

So who’s managing your investments? Are you trying to do it yourself, after work and putting the kids to bed, but before Letterman? Are you relying on Cramer or Suzy Orman, or one of the popular magazines for your tips and advice? Are you concerned that the complexity of the investment world and the myriad available choices is becoming too daunting for you to navigate alone?

Maybe your money is with Merrill Lynch, Morgan Stanley or one of the other traditional broker-dealers. By the way, did you know that Merrill Lynch recently imposed a minimum asset level of $250,000, below which they don’t even want you as a client? Many of the other big brokerage houses have similar, or higher, minimums. Is that who you want managing your hard-earned money?

Are you aware that a stockbroker does not have a fiduciary duty to place the interests of their clients above their own interests? In lieu of this high standard, stockbrokers must simply adhere to a “suitability” obligation, which is defined as making recommendations that are consistent with what they define to be in the best interests of the customer. Unfortunately, their interests, and the those of the firm that employs them, can often conflict with your individual needs because their first duty is to their employer; you come second. In contrast, a Registered Investment Advisor (RIA) typically adheres to a fiduciary standard whereby the needs and interests of the client legally comes first. This is a very important and powerful distinction.

Given the more stringent guidelines imposed on investment fiduciaries, there is little question that the fiduciary standard provides better protection for individual investors. So when you’re thinking about who’s currently managing your investments, or who you may want to manage them in the future, keep that in mind. If you have any questions, give me a call at 914-481-5888 or email me at greg@waminvest.com.

2 Responses to “Who’s Managing Your Investments?”

  1. This is an interesting read, Greg. I was not aware of the differences in legal and fiduciary duties between stockbrokers and RIAs. Great to know!

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