Last week The Wall Street Journal reported that the probe into how Wells Fargo has systemically misled clients now extends to practices in its wealth management division. Bloomberg recently reported that J.P. Morgan’s “failure to properly inform some…clients about conflicts of interest has resulted in a record $30 million whistle-blower award.” And the Labor Department’s Fiduciary Rule, which would require brokers to act in the best interests of their clients in retirement accounts, is so deeply contested by industry insiders that it might end up at the Supreme Court.
We find these reports profoundly disturbing. But, unfortunately, they are not new news. The inherent biases they spotlight are deeply rooted in many large financial institutions’ advisory practices due to revenue sharing agreements and bonuses linked to the selling of more expensive products or the use of the parent firm’s investment products. As these stories highlight, in far too many firms, clients do not come first.
We made the decision to establish Sage as an independent investment advisor nearly 30 years ago to ensure that our clients’ best interests always come first. It is a decision we’ve never second-guessed, and we believe that the value of our independence is worth enumerating.
- Our independence allows us to conduct objective rigorous, thorough, due diligence in constructing our investment portfolios. Our investment recommendations are driven by our motivation to only do what we believe is in the best interests of our clients.
- Our independence gives us the freedom to choose from a wide variety of investments for our clients. We base these decisions on factors such as potential returns and risk, fees, track record, ethics, and liquidity, among others. In some cases, this may lead us to select a low-cost option such as an index fund or exchange traded fund. In other cases, we may recommend an actively managed investment, with a proven track record in an asset class that is not efficient and offers clients the possibility of outperforming a benchmark, such as high yield bonds, international and emerging market investments.
- Sage can work with any investment firm for the best choices for our clients (click here for a recent post on this topic). In contrast, many big banks and brokerage firms restrict client access to certain investment funds for a number of reasons, including the fact that the investment is being run by a competitor, the fund company will not share revenue with the bank on the assets that are invested, or the fund company will not pay the firm to be listed as a fund that advisors can select.
- Unlike brokerages, which may be biased to recommend and sell investments and other products (e.g., insurance and mortgages) that generate more revenue for the firm, we do not receive commissions to buy and sell investments, or any financial products on your behalf, and we do not receive any compensation from any third party. This enables us to recommend the investments that best fit each client’s needs.
- From our perspective, the most important relationship we have is with you, our client. The fiduciary standard to act always in your best interest means our relationship is straight-forward, transparent, and focused on your long-term success. Independence is a core, important, tenet of our business.
The information and statistics contained in this report have been obtained from sources we believe to be reliable but cannot be guaranteed. Any projections, market outlooks or estimates in this letter are forward-looking statements and are based upon certain assumptions. Other events which were not taken into account may occur and may significantly affect the returns or performance of these investments. Any projections, outlooks or assumptions should not be construed to be indicative of the actual events which will occur. These projections, market outlooks or estimates are subject to change without notice. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. All indexes are unmanaged and you cannot invest directly in an index. Index returns do not include fees or expenses. Actual client portfolio returns may vary due to the timing of portfolio inception and/or client-imposed restrictions or guidelines. Actual client portfolio returns would be reduced by any applicable investment advisory fees and other expenses incurred in the management of an advisory account. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Sage Financial Group. To the extent that a reader has any questions regarding the applicability above to his/her individual situation of any specific issue discussed, he/she is encouraged to consult with the professional advisor of his/her choosing. Sage Financial Group is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Sage Financial Group’s current written disclosure statement discussing our advisory services and fees is available for review upon request.
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