A friend of mine told me the story of a friend whose son was studying for the semester in Italy. She recently had some trouble with Bank of America (BofA). One evening two months into his stay, a representative of the bank phoned her at home to say that BofA suspected fraudulent activity on her son’s debit card. It seems someone was trying to withdraw large amounts of cash from ATMs all over Italy. The bank representative asked to speak to her son. The woman explained that her son was in Rome and without a cell phone. It was 6:00 PM—midnight in Rome—so she emailed her son to let him know that BofA had frozen his debit/checking account and that she’d begin the process of getting him another card tomorrow when the local branch opened.
The next morning she went to the local branch in her small town, where they’ve “known” her and her family for almost 20 years. She had her son’s most recent bank statement and met with the branch manager and asked to begin the process of issuing another card for her son. However, when the young man had visited the bank a few months before going to Rome to add his mother to his checking account, in case he had trouble abroad, BofA had made a clerical error and had listed his mother as the co-owner of the savings account, which had not been targeted by the thief. The upshot was surprising and frustrating: Because she was not on the account, the problem was not the bank manager’s concern. Her son would have to call the bank himself—on a landline—and deal with the fraud unit.
Error after error ensued as her son tried to acquire a new bank card. First, the branch manager provided her with an incorrect phone number to pass along to her son. And although the replacement bank card arrived seven days later, as promised, it arrived at their home in Massachusetts, not in Rome. After she spent $57 to overnight the bank card to Rome, several days later a second card mysteriously arrived in Massachusetts from BofA, making the first card useless. At that point, a BofA representative, the sixth or seventh person the son had spoken with—having to repeat his story each time—suggested something surprisingly simple. The original, frozen account could be opened for an agreed-upon hour so the young man could make a major withdrawal to hold him over until the second card arrived in Rome.
This experience opened her eyes. She realized that although she was not listed on the checking account, the first BofA representative had allowed her to give permission to freeze it. Why? The account has fraud protection, and BofA didn’t want to be liable for any charges. Only after a series of errors on their part did BofA suggest what might have been the easiest solution from the start—open the original account for a brief period and allow the young man to get some cash. Why not suggest this sooner? Probably because the thief would then have had another chance at the account—all $550.
I share this story because, for all the big banks’ commercials featuring friendly bankers chatting warmly with their customers, these institutions seem fundamentally unable to put themselves in their customers’ shoes and understand their needs. In this case, BofA was more worried about the exceedingly small chance they could lose a relatively trivial amount—$550—than they were about ensuring her son’s safety abroad or her peace of mind at home. Moreover, they totally ignored the value of their established, 20-year relationship with their customer.
It’s not much of a leap to suggest that this “me first” mentality extends to the BofA Merrill Lynch brokers, as well as those at MorganStanleySmithBarney, UBS, JP Morgan, and other large, impersonal institutions, brokerage firms, or registered investment advisors. Although willing to take taxpayers’ money in the bailout, ironically, these large financial institutions often fail their customers in times of need. Banks that are too big to fail are often too big to look out for their customers.
So, who can you trust to manage your finances and help you reach your goals? A large institution that, operationally and philosophically, can only put itself first? Or a registered investment advisor (RIA) whose fiduciary standard means he or she will always act in your best interests? The choice is clear. Here’s what you get when you work with an RIA:
- A fiduciary who puts your interests first. Maybe it’s our country’s entrepreneurial nature, but as companies grow, they sometimes abandon their focus on customers. What’s more, often the best and the brightest employees leave the big company for smaller companies that still embrace high service standards. The financial services industry is no different. Historically, we’ve seen the best advisors leave large Wall Street firms to join more consumer-centric boutique RIA firms that have a better service platform and a commitment to deliver truly customized advice that is always in the client’s best interests. That trend is even more prevalent today as, in the wake of Bernie Madoff’s crimes and the financial crisis of 2008, the importance of operating under a fiduciary standard has become more valuable to the customer.
- A trusting, long-term relationship. Yes, advisors must have broad expertise to manage money but, at the core, the advisory business depends on a solid, trusting relationship. Representatives at major financial institutions, for the most part, are short-sighted, hourly employees who are not empowered to solve problems but, rather, want to sell products, managers or services. On the other hand, the RIA is interested in getting to know you and staying by your side as a guide for the long term.
- Access to the full product universe. Whereas brokers push products, managers and services their managers instruct them to push, RIAs can evaluate and choose from the full universe of investment products to ensure their clients’ needs are met. Boutique RIA firms like mine do not have proprietary products or investment managers like large Wall Street firms. Again, this means we research to find products that are truly appropriate for you, rather than simply making selections from a list of proprietary products.
- Independent thinking. Unlike the environment in large companies that encourages cookie-cutter advice and standard solutions, RIAs tend to be more independent thinkers. They may take their knowledge a step further and, with access to a wider range of products, craft a truly unique solution customized for the client.
- Access to the decision-makers. The leadership at big brokerage firms is far removed from clients who must be content to deal with representatives who work with a sales mentality and view potential investors as “assets to be gathered” or the next commission check. At a small boutique RIA firm, you work with a team of professionals who knows you by name and is in touch with your goals. I’d add, too, that the support team at a boutique firm also tends to be more involved with the individual customer’s investment needs and goals than at the larger firms.
- A customized professional network. Large financial institutions, and even the large RIA firms, may have accountants or attorneys on staff; however, their expertise may not be exactly what the client requires. Boutique RIAs like Bernhardt Wealth Management, on the other hand, choose to work with a wide variety of attorneys, accountants, or other professionals from their network. These diverse strategic relationships ensure that the advice is appropriate for each client and unique situation.
In closing, I always encourage prospective clients to meet with representatives from the major brokerage institutions and large RIA firms. I find that those meetings underscore the difference between these too-big-to-fail firms and our boutique RIA firm. Clients who ultimately choose to work with us value the difference between my fiduciary standard and the brokers’ suitability standard that requires only that they make “suitable” investments for clients. Clients also appreciate how our comprehensive approach to financial planning and investment management is more beneficial than Wall Street’s focus on just money management. Furthermore, to quote the theme song from Cheers, I think that most times, “You want to go where everyone knows your name.”