The major problem we have identified is that large financial institutions, for the purpose of maximizing shareholders’ value, focuses on increasing profits as their top priority. Unfortunately, in that setup, clients’ performance and quality of service has become secondary. Actions speak louder than words, and this is the reason revenue sharing agreements have been the “normal’ practice of the retail financial industry while carefully keeping it away from the eyes of their clients. it just doesn’t look very good… 


Hard cold facts of the foundation of the investment industry

The financial services industry has been one of the most fined and has been settling most of the largest claims since the 2008 financial crisis. Very few firms and representatives actually are what they say they are. We identified huge conflicts of interests and decided to open our own business to provide a solution to the huge issues the industry has created by always striving to make more money from you rather than for you. An industry in which the words ‘trust’, “integrity” and “advice” are misused and disguised behind the curtain for clients abuse and misleading facts. An industry which the Department of Labor had to step in and finally pass a law to make all financial professionals who work with retirement plans to “act in the best interests of their clients, and to put their clients’ interests above their own”. You think it should be common sense but it is far from it.

“No matter how big the lie is, repeat it often enough and the masses will regard it as the truth.” John F Kennedy

Is your financial firm objective and transparent?

Take a look at the the right column and the list we have put together for you: If your current firm is listed, it probably means that you may not be fully aware of all the reasons why your firm has recommended you such investments for your account. Take a look and find out by clicking on the firm’s name.

Fiduciary vs. suitability standards

Every financial firm gives investors access to mutual funds but just a very few actually focus on selecting the best investment for you. Here is one of the reason: the huge difference between suitability and fiduciary: which one do you want?

Advisors follow the Fiduciary Standard

The fiduciary standard was established as part of the Investment Advisors Act of 1940. The U.S. Securities and Exchange Commission (SEC) holds Advisors to a fiduciary standard that requires them to act in the best interest of the client – specifically stating that they must put their clients’ interests above their own. The fiduciary standard also dictates that the Investment Advisor must divulge any possible conflicts.

Brokers follow the Suitability Rule

Brokers are held to a different standard that is set by their governing body,Financial Industry Regulatory Authority (FINRA). They must follow the suitability rule—which states that a Broker needs to believe that recommendations given are consistent with the interests of the client’s financial needs and circumstances at the time. The rule does not set standards around conflicts of interest or a need to place clients’ interests before one’s own — as a result, many believe the suitability rule leaves room for conflicts to arise between a Broker and client. One of the biggest conflicts concerns commissions paid to the broker for managing investments in the company’s fund offerings.

Broker dealers derive big income from revenue-sharing deals. Read the article.

Revenue Sharing Agreement

How would you feel if you doctor was only prescribing medicines that he gets paid commissions on?

We don’t believe revenue sharing agreement should have a place in the industry when advising clients. Revenue sharing agreement actually display a weakness in the fund that has them in place with a distributor because funds with the best performance sells themselves and don’t need to pay commissions to get recommended.

The exact same thing applies for your investments: you do not want to work with a firm that has any revenue sharing agreements in place. The large majority of firms have a much reduced playing field constrained by revenue sharing agreements which is directly and disappointingly reflected in clients’ account.

Non-Objective Advise for Fund Selection

Revenue sharing is one of the mutual fund industry’s most controversial and least talked about practices. Revenue sharing is money paid to financial advisers or broker-dealers in exchange for buying funds from a fund company. These payments are often not disclosed to investors. This is a common practice among brokerage firms where mutual fund companies that pay the brokerage firm get preference in their sales efforts.It is a pure biased advice given to investors and cheating clients.

Costly for Investors and Hurting Your Performance

Revenue sharing payments are mutual fund distribution costs that conflict with continuing shareholder interests by directly reducing fund assets and shareholder returns. There are transparency and disclosure issues. Revenue sharing payments are not separately disclosed in fund expense ratios and for this they have been called the fund industry’s “dirty little secret.”

Mutual Fund Competition

The large brokerage firms have mutual fund sales competitions! Yes they do! How does it make you feel to know that certain advisors are going to recommend that fund this quarter for his own interest?

Difference of objectives between mutual funds

Mutual fund companies that want to raise assets
The fund never closes. The focus is on marketing and distributions, not on performance. It ‘s all about volume.

Mutual fund companies that want performance
The fund could close to new investors. The focus is on research, management and performance, not on marketing. It’s all about quality and efficiency.

Doing what is right: closing the fund.

Fund managers close their funds to new investors because they want to keep their investment process pure. They don’t want to change their proven process to make investors happy. They do what is right for the client. A fund closing to new investor is always a good sign because the manager(s) is looking for quality above volume in his fund. In other words, the focus is on the efficiency and the performance of the fund, not on the management fees from the volume of investments. This is key.